Indian company Mahindra & Mahindra a maker of utility vehicles and tractors inked an agreement to buy 70 percent of the ailing South Korean automobile company SsangYong Motor Company (SYMC), for $463 million or 2,100 crore rupees. Ssangyong sources revealed that the company had sought bankruptcy protection after continued fall in sales.The deal is expected to be completed by March 2011 after required approvals. M&M plans a grand launch of three new SsangYong models in the following years to boost sales of the company.
In a media release issued on 23rd November, 2010 Pawan Goenka, president - automotive and farm equipment sectors, M&M, said, “The coming together of Mahindra and SsangYong will result in a competitive global UV (utility vehicle) player. Together with its financial capability, M&M offers competence in sourcing and marketing strategy, while SsangYong has strong capabilities in technology.”
“We are committed to leverage the combined synergies by investing in a new SsangYong product portfolio, to gain momentum in global markets,” Goenka added.
M&M sees this as an opportunity to launch a premium portfolio of SUVs in the Indian market. This will offer a new growth avenue for SsangYong and also enhance M&M’s dominant position in the UV segment.
The deal was struck after parleys between the two companies since August, 2010 when the Korean company announced M&M as the preferred bidder from the original list of seven. The bidders list figured the Pawan Ruia group, Renault-Nissan, private equity firm Seoul Invest and Yong An Hat Company. Many dropped out due to the high valuation sought, official sources added.
It appears that after M&M’s 70 percent acquisition also, SYMC will continue to function as an independent entity, with a primarily Korean management. This deal will help both SsangYong and M&M to leverage their respective product portfolios, providing an opportunity to create distinct positioning.
The media release also said that the wide sales and distribution networks and complementary products lines of both SsangYong and M&M will provide access to many overseas markets for both companies.
