M''M Acquires SML Isuzu for Rs 555 Crore: Strategic Fit for Growth

Mumbai, Apr 28 (PTI) Mahindra & Mahindra on Monday said the proposed Rs 555 crore acquisition of SML Isuzu is a strong strategic fit for the company that would put it in a strong position.

The company also said that with this buyout, it sees lots of opportunities around cost, platform synergy, aggregates and other areas of operations, especially network and supplier synergy.

M&M last week announced it will acquire 58.96 per cent stake in commercial vehicle maker SML Isuzu.

As part of the transaction, M&M would acquire the entire stake of 43.96 per cent held by Sumitomo Corporation, promoter of SML, and separately buy a 15 per cent stake held by Isuzu Motors Ltd, public shareholder of SML, for an aggregate consideration of Rs 555 crore.

Besides, the automaker will make an open offer to acquire a 26 per cent stake in SML Isuzu in accordance with SEBI Takeover Regulations, Mahindra & Mahindra (M&M) said in a statement.

The proposed acquisition is a step towards establishing a strong presence in the greater than 3.5 tonne CV segment, where M&M has a 3 per cent market share at present as compared to a 52 per cent market share in the less than 3.5 tonne LCV segment.

This acquisition will double the market share to 6 per cent with a plan to increase this to 10-12 per cent by FY31 and over 20 per cent by FY36, as per the company.

"This is a business that we really like and we feel can do a lot, and which is where we got the opportunity of an acquisition which we feel will position us very well," Mahindra Group Managing Director and CEO Anish Shah said on Monday at a press conference and analyst meet in Mumbai.

This is an acquisition which is appealing and a very "strong strategic fit", he said.

The group over the last five years has seen significant growth in many of its businesses, including what it calls "growth gems", Shah said, adding "that growth is being accelerated now as we get to the third phase of our journey, which we call delivering scale."

The company wants multiple businesses to be at a much larger scale over the next five to 10 years, he said adding the "growth gems" will grow at a target of 5x over the next five to seven years. "And in that context, we have a very interesting opportunity."

"We're looking at buying 59 per cent stake of SML at Rs 650 per share. This includes a stake from Sumitomo and Isuzu both.There will be an open offer that gets triggered based on the regulation, and that will be for up to another 26 per cent," said Rajesh Jejurikar, Executive Director and CEO for automobile and farm sector at M&M.

He said that the average price for the 26 per cent stake through open offer works out to Rs 1,554.6 per share, adding for that there would be an outlay of another Rs 585 crore.

The transaction, including the open offer, is subject to the approval of the Competition Commission of India and is expected to complete within 2025 in accordance with SEBI Takeover Regulations, M&M said. Incorporated in 1983, SML Isuzu has a presence in the trucks and buses segment.

"As we have done well in multiple spaces in this industry, we are now looking at the greater than 3.5 tonne space, and that is what we feel we can play very well in," said Shah.