India's largest manufacturer of tractors and utility vehicles Mahindra & Mahindra (M&M) and makers of the Dunlop brand of tyres, the Ruia Group, have bid for cash-strapped Korean sports utility vehicle (SUV) manufacturer SsangYong Motor Company (SMC).
The struggling South Korean company, the smallest car maker in that country, has seen surprise bids from seven global companies, including the two from India and French automotive giant Renault, through a subsidiary.
China's automobile major Shanghai Automotive Industry Corp (SAIC), which once owned nearly half the total shares in SsangYong, now owns 10 per cent in it. The Korean company has been also stuck in a court-led restructuring process since early 2009.
Sources in the industry said both M&M and the Ruia Group had submitted a letter of intent (LoI) for buying SsangYong, whose valuation has been pegged between $300 million and $500 million (Rs 1,400 crore-Rs 2,300 crore) by the media in Korea.
SMC makes Rexton and Kyron SUVs and the Chairman sedan. Due to lack of availability of fresh investments, slumping demand for new vehicles, rising competition in the domestic market over the last two years and lack of focus from SAIC, the company has been put on the block.
An M&M spokesperson said: “As a matter of policy, we do not comment on market speculation.”
A Ruia Group spokesperson said: “We confirm our bid for SsangYong. We have put in a letter of intent for the same.”
The Kolkata-based group has eight companies under its fold, of which four are related to the tyre business. It came into the limelight with a successful bid in 2005 to acquire the ailing Dunlop Ltd. But, this will be the first time it would get into vehicle manufacturing.
SsangYong has a market share of 2 per cent in South Korea and has suffered substantial losses over the past few years. It reported a net loss of Rs 100 crore (Won 25.8 billion) in the first quarter of this year. SAIC, which paid $500 million in 2004 to acquire nearly 49 per cent in debt-laden SMC, is its current promoter.
Volkswagen AG (VW), one of the world's three largest car makers, was also in the fray earlier when it, along with the help of partner SAIC, had expressed interest in SsangYong. SAIC has a joint venture with VW in China.
With planned expansion in newer markets such as Vietnam and Russia and through the launch of a new SUV slated later in the year, the company was hoping to double its sales this year to 85,000 units. This would have been ultimately scaled up to 1,83,000 by 2013.
M&M, too, was in the race to buy controlling stake in SsangYong in 2003 when its holding company, Daewoo, went bust and the creditors put up the 54 per cent stake in the Korean company up for sale. It later pulled out, as it believed SMC had failed to fit into its overall plans for the international markets.
Earlier in the month, an SMC spokesperson said it would soon issue an official stake-sale announcement, for which it had sent out introductory letters. The Korean company started the sale process in April and was believed to be working on due diligence since then.
Acquisitions are coming at a thick pace for M&M. On Wednesday, it announced the buying of a controlling stake in REVA Electric Car Company (RECC) for an undisclosed sum. It purchased 55.2 per cent in RECC from the Maini family, with a commitment of fresh equity infusion of Rs 45 crore