Inching towards acquiring a majority stake in SsangYong Motor (SM), auto major Mahindra & Mahindra on Monday said it has signed an agreement with the beleaguered South Korean firm.
In a filing to the Bombay Stock Exchange (BSE), Mahindra & Mahindra (M&M) said that the signing of the memorandum of understanding will be followed by "a detailed due diligence process and finalisation of definitive agreements".
The company, however, was tight-lipped on the sum that it had agreed to pay to emerge as the preferred bidder for the South Korean automaker, which has a debt of USD 640 million.
M&M has been maintaining that it would be inheriting a debt-free company, when it completes the acquisition of SM by November this year.
"Korea is one of the world's leading centres of automotive excellence and SsangYong brings with it a rich legacy of R&D and innovation. India is a rapidly growing SUV
market and will create new growth avenues for SsangYong," Mahindra Group Vice Chairman and MD Anand Mahindra said.
The synergies between both the brands will make the group a "combined force to reckon with" in the global utility vehicle space, he added.
On August 12, M&M was chosen as the preferred bidder by SM, outbidding other firms such as the Kolkata-based P K Ruia Group.
M&M said that it will retain the Korean heritage of SM and would function under a Korean management. "The acquisition will offer financial stability to SM, while making M&M the largest Indian employer in Korea," it added. Rothschild and Samsung Securities are advising M&M on the deal.
M&M had said once the deal is done, it would consider bringing the premium SUVs from SM's stable into India.
"We are committed to leveraging SM's strong competencies in R&D and technology by investing in a new SM product portfolio, which will help us gain momentum in global markets," M&M President (Automotive and Farm Sector) Pawan Goenka said.
SM, which has SUV models like 'Rexton', 'Kyron' and 'Actyon' and sedan 'Chairman', has been undergoing a court-led restructuring from 2009.
China's SAIC Motor Corp owns 10 per cent in the troubled automaker and about 70 per cent is held by creditors, led by state-owned Korea Development Bank.
SM currently has two manufacturing facilities in South Korea and has an employee strength of 4,800 people. It has 138 dealers in its home country, while 1,300 dealers are located
across 98 nations. It sold 35,000 units in 2009.
Shares of M&M were trading flat at Rs 622.50 a piece on BSE during afternoon.