South Korea's troubled Ssangyong Motor named Mahindra and Mahindra, India's top utility vehicle maker, as its preferred buyer in a deal that reinforces the growing clout of emerging market automakers.
SUV maker Ssangyong, which is in bankruptcy protection, said Mahindra had been chosen after making the highest bid and securing financing plans, though declined to disclose the offer price.
Sources told Reuters last week that Mahindra was willing to pay up to $400 million to acquire a majority stake in Ssangyong as it seeks to become a major global utility vehicle maker.
Analysts say the deal will help Mahindra quickly build a worldwide footprint as the Korean maker of the Rexton and Kyron SUVs and the Chairman luxury sedan also exports to Russia, Europe, China, and the Middle East.
"The biggest attraction for Mahindra would be Ssangyong will give them quick and easy access to global markets," said Ahn Soo-woong, an analyst at LIG Securities.
Automakers from emerging markets such as India, South Korea and China have become increasingly important on the global stage in recent years.
Korean market leader Hyundai Motor was a clear winner during the global crisis, stealing market share and growing profits as U.S. rivals struggled to survive.
China's Geely completed its purchase of Volvo cars from Ford Motor this month, while Mahindra and Tata Motors fought in 2008 to buy luxury brands Jaguar and Land Rover.
India's Ruia group, which also bid for Ssangyong and was named a reserve bidder, purchased tyremakers Dunlop and Falcon Tyres.
SSANGYONG SHARES FALL
Shares in Ssangyong dropped 8 per cent on Thursday amid uncertainties over the deal as it struggles with about 740 billion won ($626 million) in debt and needs fresh capital to increase investment.
The stock plunged by the daily limit of 15 per cent on Wednesday after Renault-Nissan pulled out of the bidding earlier this week, raising concerns that it may fail to find a buyer.
"There is uncertainty whether a deal could be reached. Mahindra wouldn't want to overpay but Ssangyong may need more than what Mahindra proposes to survive," said Jung Mee-kyung, an analyst at Korea Investment & Securities.
The deal, if agreed, will mark a third change of main shareholder for Ssangyong. Now defunct Daewoo group took over the company in 1998 and Ssangyong was sold in 2004 to China's top automaker SAIC Motor Corp, but both failed to grow the automaker to challenge Hyundai.
Ssangyong set the deadline for a binding offer for the company on Tuesday and three groups including Mahindra, India's Ruia Group and South Korea's Young An, which owns a bus making unit, submitted proposals to buy the cash-strapped auto company.
Ssangyong said the final acquisition price would be decided in October after due diligence and plans to close the deal in November.
Analysts say Ssangyong, which has been under court-led restructuring since early 2009, hammered by one of the industry's worst downturns, may also help Mahindra develop technology and add to its vehicle line up.
After a dismal 2009 and nearly two months of strikes to block layoffs, Ssangyong has been recovering fast under a court-led restructuring.
The company has about 2 per cent of the Korean auto market but its sales more than trebled in the first seven months of this year to 43,811 vehicles.
($1=1182.0 Won)
