M&M said to be in talks to buy stake in Swedish firm

Anand Mahindra-led firm is one of the two companies that have shown interest in NEVS

Anand Mahindra-controlled automobile major Mahindra & Mahindra, the market leader in the sports utility vehicle (SUV) segment, is planning to purchase a stake in National Electric Vehicle Sweden AB (NEVS), the holding company that bought assets of Saab Automobile two years ago, show documents filed in a local Swedish court.

NEVS, which earlier ran into financial difficulties, signed a term sheet with M&M two weeks ago to begin intense negotiations. Mumbai-based M&M is one of the two companies (both Asian) that have evinced interest in NEVS; the other one is believed to be a company of Chinese origin.

A document filed in court by a NEVS creditor had mentioned M&M as the automaker that was about to buy a stake in the Swedish company, said a Dow Jones report.

Approached for a response, a spokesperson for M&M said in an email: “We would not offer any comments on the issue.”

Last week, NEVS petitioned a local Swedish court to extend a period of creditor protection, granted earlier this year, saying its talks with potential investors were close to completion. The Swedish company, owned by National Modern Energy Holdings, a Chinese-Japanese energy company with headquarters in Hong Kong, filed for bankruptcy in August this year.

This is not the first time that M&M has shown interest in acquiring a financially stressed company. In the past seven years, the company has made unsuccessful bids to acquire renowned brands like Aston Martin, Jaguar-Land Rover, Saab and Ducati. Those talks either collapsed midway over valuation issues or other bidders tendered higher offers.

Mahindra’s first big acquisition came in 2010, when it acquired a controlling stake in South Korea’s little-known troubled SUV maker, SsangYong Motor Company, for Rs 2,100 crore. Though joint product operations and efforts at improving synergies between the two companies have accelerated in the past few years, the foreign company is yet to return to profits.

Similarly, Mahindra Two Wheelers, the loss-making two-wheeler subsidiary of M&M, bought a controlling stake in Peugeot Motorcycles (PMTC), a scooter company owned by France’s PSA Peugeot Citroen. Like SsangYong, Peugeot has also been in a financial mess, failing to generate profits in a decade. PMTC was declared a drag and burden on the group by chief executive Carlos Tavares.

Closer home, the group’s strategy was the same when it acquired business assets of now-defunct Kinetic Motor Company to mark its foray in the two-wheeler space, in 2008. Rising debt and falling demand stymied growth of Kinetic, which was struggling to stay afloat.

The company’s auto component division, Mahindra Systech, was on an acquisition spree since 2005, buying eight companies — six of those located outside India. Last year, M&M entered into a share-swap arrangement with Spain’s CIE to cede control of Mahindra Systech.

V G Ramakrishnan, managing director (South Asia), Frost & Sullivan, said: “They have been doing value hunting wisely to get the best price for their targets, which would otherwise be overpriced. They have acquired troubled companies and turned those around successfully. This strategy has paid them rich dividends.”

NEVS has milder expertise in building electric sedans which appears to be a strategic fit for M&M. The Swedish company has retrofitted the regular Saab 9-3 sedan with a battery pack and electric drive components procured from China. M&M had entered the electric vehicle space a few years ago, with its acquisition of Reva Electric Car Company. The Mumbai-based company has ambitious plans to expand its footprint in this category with at least three launches in a year.