Mahindra board clears SsangYong bid

Pawan Ruia to take a call on Monday.

The board of Mahindra & Mahindra, the Rs 31,000-crore utility vehicle and tractor maker, today gave the green signal to its management to bid for South Korea’s cash-strapped automobile company, SsangYong Motor.

In a filing to the Bombay Stock Exchange, M&M said: “The board of directors of the company have authorised submission of a binding bid to acquire a majority stake in SsangYong Motors Company, South Korea”.

M&M is India’s largest maker of utility vehicles with brands like Bolero and Scorpio in its portfolio. It now wants to have a global footprint – in emerging as well as mature markets. The acquisition of SsangYong could help it cut the go-to-market time in markets like Europe and the United States. SsangYong is the fourth-largest car maker in South Korea, although its market share is just 2 per cent. The company makes utility vehicles such as the Rexton, Kyron and Actyon. It has a large number of dealers in Europe and Asia. Senior M&M functionaries have indicated that the due diligence on Ssangyong shows that it can be turned around.

M&M, which is among the final six companies from the original seven shortlisted to bid for the troubled Korean maker of utility vehicles, has not disclosed the financial details of the bid. Company officials remained tightlipped on the sum that the company could fork out to make a successful bid for SsangYong. Speculation on the valuation has been rife with international analysts and consultants putting the figure between $350 million and $500 million (Rs 1,600 crore to Rs 2,300 crore). The M&M board’ decision on the SsangYong bid comes after it was postponed twice last month as the directors wanted more information from the target company.

Meanwhile, Kolkata-based Pawan Ruia group, which makes Dunlop tyres in the country, appeared to be still undecided on taking a final call on the bid, though the final bid date was only three days away (August 10). The company said that the decision in this regard will be taken only when Ruia, who is travelling, returns on Monday. Others in the fray include Renault Samsung (a Korean subsidiary firm of Renault), Seoul Invest (a private equity firm) and Daewoo Bus.

Although China’s largest automobile maker, Shanghai Automotive Industry Corporation (SAIC), was once the largest shareholder in SsangYong, Barclay’s Bank Plc and Barclays Capital Securities are now the largest shareholders in the troubled company with a combined stake of over 8 per cent. SAIC has been reducing its stake in loss-making SsangYong over the past few years, looking for an exit. Samjong KPMG and Macquarie are handling the sale process. SsangYong Motor has been under court-led bankruptcy protection since early 2009 after suffering cash exhaustion.