M&M picks up 13.5% in Spanish firm CIE for Rs 740 cr
Mumbai: In a multi-structured deal, the Mahindra Group on Saturday announced picking up 13.5 percent in the Spanish auto component maker CIE Automotive for 96.24 million euros or about Rs 740 crore, thus becoming the second largest shareholder in it.
The deal will also see CIE investing around 100 million euros in Mahindra Systech, which is Mahindra's automotive component businesses, for buying shares that will trigger an open offer, which is likely to open in October.
The deal will also involve the USD 16.2-billion Mahindra Group selling stakes in its three group firms held under Systech, for Rs 673.68 crore to four Spanish companies-- Participaciones Internacionales Autometal Dos, SL, CIE Automotive SA and Autometal SA.
Mahindras have been on acquisition drive in recent years. The deal with CIE is the biggest it has made in the auto space after the takeover of the then sick Korean SUV player SsangYong Motor in March 2011 for USD 463 million.
The deal will also see the formation of a global automotive component supply network with combined annual sales of around Rs 15,000 crore with operations in the Americas, Europe and Asia held through listed businesses in Spain, Brazil and India, the Mahindras said.
"The alliance will enable us to rise above competition, quickly extends our reach into America and China and reach of CIE into India in coming years," M&M Chairman Anand Mahindra told reporters here announcing the deal.
"Eight years ago, we set out to build a domestic automotive supplier with a global footprint and this drove a series of acquisitions by us here as well as Europe. We have been listening closely to our customers who have asked to step up our globalisation efforts and follow them around the world," Mahindra said.
A new entity, Mahindra CIE, will be formed via a merger of Systech Companies and CIE Forgings, Mahindra said, adding M&M will also nominate two directors on the the CIE board.
Mahindra Systech consists of the three listed companies-- Mahindra Forgings, Mahindra Ugine Steel Co and Mahindra Composites; and the two unlisted entities -- Mahindra Hinoday Industries and Mahindra Gears.
CIE Automotive is one of the main suppliers of components and sub-components for the automobile sector, operating in Europe, Brazil, Nafta and China with sales of 1.65 billion euros.
As part of the transaction, CIE Automotive, through one of its subsidiaries, will acquire from Mahindra Group a stake in its listed and unlisted companies belonging to Systech automotive component business on the one hand, and CIE Automotive on the other will contribute its forging businesses in Spain and Lithuania and together consolidate all companies under MFL which will be rechristened Mahindra CIE, he said.
The share sale by Mahindra will trigger open-offer provisions under the Sebi regulations.
"There is a sale of shares, it triggers open offer. CIE may invest around 100 million euros for buying shares," Mahindra Systech President Hemant Luthra said.
The proposed business transaction will be carried out in a series of steps over the next year that will culminate in M&M investing 96.24 million euros (nearly Rs 740 crore) through its subsidiaries for a stake of 13.5 percent in CIE Automotive at a price of 6 euros per share.
On the other hand, 4.8 crore equity shares aggregating to 52.65 percent of equity share capital of Mahindra Forgings, a listed subsidiary of M&M, will be sold for an aggregate consideration of Rs 393.08 crore, at a rate of Rs 81 per share.
Further, 3.03 crore equity shares aggregating to 64.96 percent stake in Mahindra Hinoday Industries is also being offloaded for Rs 268.96 crore at a rate of Rs 88.90 apiece.
Likewise, under the agreement, 13.41 lakh equity shares of Rs 10 each aggregating 30.38 percent stake in Mahindra Composites will be sold for a consideration Rs 10.01 crore at a rate of Rs 74.70 apiece.
Besides, Mahindra Holdings will enter into of a share purchase deal with Participaciones Internacionales Autometal Dos, SL, CIE Automotive and Autometal involving sale of 2.2 lakh shares aggregating to 4.98 percent stake in Mahindra Composites for an aggregate consideration of Rs 1.64 crore at a rate of Rs 74.70 apiece.
"CIE's leadership and shareholders have a strategy to develop India as the gateway to the Asian markets. We have been impressed by the promise of the automotive market here and the growing emergence of India as a key global production hub for small cars.
"In M&M, we found a partner with a multi-technology portfolio similar to ours. So while we are happy to see CIE gaining an entry here, we are equally pleased to have M&M as one of our largest shareholders," CIE Automotive chairman Anton Pradera said.