Mahindra completes acquisition majority stake in SsangYong

New Delhi, Mar 15 (PTI) Indian Auto major Mahindra &
Mahindra on Tuesday said it has completed the acquisition of a
majority stake in South Korea's SsangYong Motor Company (SMC).
Mahindra, which emerged as the preferred bidder for
SsangYong in August 2010, will now hold a 70 per cent stake in
SMC, for which it has shelled out USD 463 million (about Rs
2,105 crore).
With the new management taking control, SMC will invest
over 240 KRW (nearly Rs 960 crore) this calendar year on
product development and brand building. The firm will increase
investment in product development by 70 per cent in 2011, as
compared to last year, at over KRW 200 billion (over Rs 800
crore).
It will also invest over 40 billion KRW (about Rs 160
crore) for brand building in Korea -- a 60 per cent increase
over 2010 -- and increase overseas brand investment by over
four times in 2011.
"These investments will be funded by SMC's internal
accruals. After the debt restructuring SMC's balance sheet is
clean. Although it is unlikely that it will need debt for this
investment, but if needed, it can raise," M&M President,
Automotive and Farm Sector, Pawan Goenka told PTI from Seoul.
He said Yoo-il Lee has been appointed as the new CEO of
SMC, while Dilip Sundaram from Mahindra will be the new CFO.
Also a new board of directors with six members has been
formed.
"There are three independent directors, along with one
member from SMC and two from M&M," Goenka said.
From M&M, it will be Goenka himself and M&M Executive
Director & Group CFO Bharat Doshi. The Korean firm will be
represented by new SMC CEO Lee.
Asked if there will be a change of name of SMC, Goenka
said: "No decision has been taken yet on the name change of
the SMC and also on the branding side of products."
He said strategic plans such as the India project, which
involves launching the Rexton and Korando-C in India, have
already been kicked off.
Earlier, he had said that the two vehicles would be
launched in India by the end of 2011.
Goenka also said discussions are on to explore
opportunities for joint product and technology development and
synergy in global operations and purchase.
"On the R&D front, SMC and M&M will remain independent
but whenever there are possibilities of sharing platforms, it
could be explored," he said.
Moreover, M&M is also reviewing utilisation if its IT
systems for SsangYong, besides considering the possibility of
Mahindra Finance setting up operations in Korea to enhance the
sales of SsangYong vehicles.
"First, we have to understand the norms for such a
venture (financing) in Korea and after understanding the
market, we may decided to either go for the joint venture
route or go solo," Doshi said.
For M&M, which had lost the race to acquire JLR in 2008
to homegrown rivals Tatas, the acquisition of SMC is a big
step toward realising its ambition to be a global player in
the utility and sports utilitiy vehicles segment.
"This is a landmark day for all of us at Mahindra as it
marks the beginning of what I am sure will be an enduring
partnership with SsangYong Motor Company... The synergies
between the two companies in the areas of R&D, product
development and platform sharing, will make the combined
entity of Mahindra and SsangYong a force to reckon with in the
global utility vehicle space," Goenka said.
M&M said a Synergy Council comprising senior management
from both companies will be established to ensure focus and
delivery of synergies between the two companies. The council
will focus on various aspects such as global procurement, new
car development and business strategy to penetrate
international markets.
SMC had increased its sales considerably in 2010 to
81,800 units in 2010 compared to 35,300 units in 2009. The
company was hit badly by the market meltdown in 2008-09 and
had to undergo a court monitored restructuring and was put on
the auction block.
M&M had beaten rivals, including the Kolkata-based PK
Ruia Group to become the new owner of the Korean auto-maker.