M&M to buy stake in Mitsubishi Heavy's farm machinery unit

To buy 33% stake in the unit for $25 million

Tractor market leader Mahindra & Mahindra on Thursday said it had signed an agreement to buy 33 per cent stake in agricultural machinery making company of Mitsubishi Heavy Industries for $25 million (Rs 160 crore). M&M would get new common shares in addition to Class A (non-voting) shares of Mitsubishi Agricultural Machinery Co (MAM) and four board positions.

The deal is expected to be closed by October 1, it clarified. The two companies have committed on joint development of products, sharing of engines and transmissions, common sourcing of parts and reciprocal product access for respective strong markets. The two are open to cross-badging too, said a senior executive of M&M.

MAM is Japan’s fourth largest agri-machinery entity with revenues of $408 million (Rs 2,594 crore) last financial year and an employee strength of 1,700. It sells tractors, combine harvesters, rice transplanters and other agri-machinery. Pawan Goenka, executive director, M&M said, "India is not the primary driver of this acquisition. We bought stake in this company to explore global opportunities. It would be difficult for me to syat which markets we would be targeting but we will look at the ASEAN markets.”

The two companies have a decade-long partnership in the US where products of Mitsubishi have played a significant role in Mahindra's success. With this alliance, the companies will focus on making investments in marketing ad product development, said a statement.

The acquisition, though, will not change the global pecking order of tractor manufacturers. John Deere will continue to be the world's biggest (in revenue terms) followed by CNH while M&M will remain at number five.

M&M, however, will extend its lead over John Deere and hold the title of being the world's largest producer of tractors.

Goenka however said that there are no immediate plans to launch MAM tractors in India or hike its stake further in the company. M&M along with its partners is developing new 100-110bhp tractors for international markets. The company already sells 120bhp tractors in China, 100bhp in US, 90bhp in Africa and 57bhp in India.