India's leading utility vehicle maker Mahindra & Mahindra Ltd on Monday signed a preliminary agreement to take over the ailing South Korean carmaker Ssangyong Motor Co.
Mahindra buys ailing Ssangyong
In a regulatory filing to the Bombay Stock Exchange, Mahindra said it had signed a "memorandum of understanding with Ssangyong Motor to acquire a majority stake in the South Korean SUV maker."
No figures for the deal were disclosed.
The filing said the agreement will be followed by a detailed due diligence process and the finalisation of definitive agreements.
"We are committed to leveraging Ssangyong's strong competencies in R&D and technology by investing in a new Ssangyong product portfolio which will help us gain momentum in global markets," Mahindra automotive and farm sector president Pawan Goenka said.
On August 12, Ssangyong, the smallest of South Korea's five carmakers, and its creditors said they had chosen Mahindra as the preferred bidder.
Opens new growth avenues
The company said the deal was likely to be finalised by November, but did not disclose the financials involved.
The South Korean media, quoting industry analysts, said the price for the majority stake could be up to 500 billion won (419 million dollars).
In December a court agreed to a rescue plan for the cash-strapped carmaker, enabling Ssangyong to continue operations and find new investors.
Ssangyong, which had been owned by China's Shanghai Automotive Industry Corp, was put under court protection in February 2009, after sales crashed due to the downturn in the auto industry in the wake of the global financial crisis.
SsangYong 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 countries. In the first three months of 2010, sales tripled to 43 881 units.
Mahindra is a 7.1-billion-dollar Indian conglomerate and employs 100 000 people across the world.
"India is a rapidly growing SUV market and will create new growth avenues for SsangYong. The synergies between both the brands, which share a similar heritage, will make us a combined force to reckon with in the global utility vehicle space," Mahindra vice chairman and managing director Anand Mahindra said.