Mahindra Automotive have struck gold! The company has become the preferred bidder in the race for Ssangyong Motor Company, the South Korean SUV maker and has managed to distinguish itself among the other bidders in the race which included India's Ruia Group that runs the Jessop Engineering conglomerate and Dunlop tyres.
The Indian SUV maker announced at a news conference in Mumbai today that it would sign an MoU with Ssangyong in the next two weeks. This will be followed by due diligence in September and a definitive agreement by November or December.
Mahindra says that the criterion for bidding were the bid price, debt financing, arranging finance, presenting a sound business plan, employment guarantee, the stakeholding management's will and capability and the equity stake it could pick up. M&M seemed to tick all the boxes in these regard. The bid price would be announced when the MoU is signed.
Speaking to journalists, Pawan Goenka, President, Mahindra Automotive said that if all goes through, the combined sales of the two companies would be in excess of US $ 4 billion, making it a very large SUV manufacturer in the world. Mahindra and Mahindra would acquire, at the very least, a 51 per cent stake in the company. The bid amount will retire most of the company's future debts, said Bharat Doshi, Executive Director and Group CFO of M&M group.
Turn over to know more about the products and its history and how the two manufacturers fit together. Ssangyong is primarily an SUV manufacturer with two manufacturing facilities in South Korea and around 120 dealer points in that country and 1300 dealers across the globe in 98 countries. It manufactures seven different products, two of which are luxury cars - the Chairman and Chairman W based on the Mercedes-Benz S-Class. The Chairman uses technologies and technical expertise from the German car manufacturer and the product is currently sold only in South Korea. The car is powered by 3.5-litre and 5.0-litre petrol engine options. Last year the company sold over 12,000 Chairman cars and sold a combined 40,000 odd units which is nearly three times lower than its best during 2003-05. Pawan Goenka said that the local market only deal with Mercedes-Benz for the Chairman ends soon and that the company will be able to export it to other global markets very soon. The technical tie-up with Mercedes-Benz goes as far back as 1991 and the fruits of this relationship were found in the MB100D and 140D luxury vans that were also sold in India incidentally. The 2.8-litre diesel engine found on most of Ssangyong's products is the same engine that once powered the last-gen E-Class while the 2.7-litre five-cylinder diesel engine on the Mahindra Axe SUV is also a Ssangyong sourced engine which traces back to the W211 E270 CDI.
Anand Mahindra, Vice Chairman of the M&M group was quick to point out that there are good reasons for this acquisition. One of which was Ssangyong's own internal engine development capability as well as the fact that it gives Mahindra access to a gasoline engine that the company is developing. M&M has been developing its own range of gasoline engine(s) for the last two years and this would certainly influence its own project. Anand Mahindra also said that this would be the largest Indian acquisition of a South Korean company to date.
The SUV portfolio of Ssangyong would eventually be made available in India and company officials said that they would come in why the CKD and not CBU route. M&M is keen to get in Ssangyong's newest product, the Korando C softroader and the Rexton 4x4 SUV to India at the earliest. The Korando could be aimed at the likes of the Skoda Yeti while the Rexton could be targetting a range in the region of Rs 25-35 lakh. It might also look at getting other products like the Kyron and Actyon SUVs and doesn't rule out the possibility of getting the Chairman to India.
Both companies will look at joint development of products and platforms, beginning 2011. When quizzed about the possibility of the W201 World SUV platform benefitting from Ssangyong's expertise, Pawan Goenka said that the two platforms (Korando C and World SUV) are quite similar and therefore the possibility exists.