Kubota Corp to acquire additional 5.9% stake in Escorts for Rs 1,873 crore

Escorts said Kubota Corporation will acquire an additional 5.9% stake in it for Rs 1,872.74 crore, taking the total holding to 14.99% and becoming a joint promoter in the Indian firm

Farm machinery major Escorts on Thursday said its Japanese partner Kubota Corporation will acquire an additional 5.9 per cent stake in it for Rs 1,872.74 crore, taking the total holding to 14.99 per cent and becoming a joint promoter in the Indian firm.

The company will issue 93.64 lakh equity shares through a preferential issue to Kubota at an issue price of Rs 2,000 per equity share, aggregating Rs 1,872.74 crore, subject to shareholders' and necessary regulatory approvals, the company said in a statement.

Kubota had 9.09 per cent in Escorts and post the preferential allotment, its stake in the Indian partner will increase to 14.99 per cent.

"Kubota will also make an open offer to the public shareholders of Escorts to acquire up to 26 per cent of the share capital in accordance with SEBI Regulations," the statement said.

In a regulatory filing, the company said its board has also approved changing the name of the company from 'Escorts Ltd' to 'Escorts Kubota Ltd' or any other name containing the trade names 'Escorts' and 'Kubota' as may be approved by the Central Registration Centre, RoC and other regulatory authorities.

As part of the agreement, Escorts and Kubota have decided to take necessary steps to evaluate and consider the feasibility of merger of Kubota's subsidiaries in India, where Escorts is also a partner -- Kubota Agricultural Machinery India Pvt Ltd (KAI) and Escorts Kubota India Pvt Ltd -- into Escorts, subject to necessary approvals, it added.

Kubota Corporation will become a joint promoter along with the Escorts existing promoter Nanda family, who are not selling any shares of the company. The current promoters of the company hold a 36.59 per cent stake in Escorts.

"This will enable both companies to enhance the value they have created by leveraging each other's strengths be it in technology, market access, manufacturing processes or engineering excellence. With this Escorts is positioned to become an institution that will serve Indian and global farmers for decades and centuries," Escorts Chairman and MD Nikhil Nanda said.

While Escorts is known for its stronger India presence with proven strengths in frugal engineering and manufacturing, Kubota brings world-class processes and global reach and expertise, he added.

"The construct of the new collaboration shall be based on excellence and innovation to cater to the needs of customers globally, addressing food security and environmental challenges by providing smart agriculture and infrastructure solutions. The transaction will catapult Escorts to a different level of expertise, size and growth," Nanda added.

Kubota Japan President and Representative Director Yuichi Kitao said the journey between Kubota Corporation and Escorts Ltd, which began in 2016, has reached a major milestone with the signing of "a historic agreement".

"Both Kubota Corporation and Escorts Ltd have a legacy of more than 130 and 75 years, respectively. The combined entity and the larger collaboration will provide advanced farm mechanisation solutions to address global food security and enhanced farm productivity. We are extremely proud and excited to unite for the future as one company," he added.

Kubota also intends to have Nanda engaged in his individual capacity as a non-employee with the proposed designation of Senior Managing Executive officer and General Manager of Value-Innovative Farm and Industrial Machinery Strategy and Operations of Kubota, the statement said.

Besides, there is a proposal to induct him as a director on the Board of Kubota's European business holding company, Kubota Holdings Europe BV Netherlands.

"Nanda's non-employee involvement in the foregoing capacity will not interfere with his role as the CMD of Escorts. There will be no remuneration payable to him for these services," it added.

Escorts further said its board has also approved entering into or continuing to enter into related party transactions for a period of five years with Kubota or relevant subsidiaries subject to an aggregate limit of Rs 4,500 crore per annum under mutually-agreed terms and conditions.