Ssangyong Motor Company (SYMC) and India’s Mahindra & Mahindra (M&M), its preferred bidder, on Tuesday announced the signing of a definitive agreement in Seoul.
The agreement was signed by Yooil Lee and Youngtae Park, joint receivers of SYMC and Pawan Goenka, president, automotive and farm equipment sectors, M&M.
Go deeper with GlobalData
“The securing of a solid partner who has both financial capability and is engaged in diverse markets will allow Ssangyong to emerge as a global SUV player through the strengthening of R&D, investments in product development, better business competitiveness and global sales expansion”, said Lee.
“The coming together of Mahindra and Ssangyong will result in a competitive global UV player. Together with its financial capability, Mahindra offers competence in sourcing and marketing strategy while Ssangyong has strong capabilities in technology. We are committed to leverage the combined synergies by investing in a new Ssangyong product portfolio to gain momentum in global markets”, said Goenka.
He added: “There is also an opportunity to introduce a premium portfolio of SUVs in the Indian market providing a new growth avenue for Ssangyong and further strengthening our dominant position in the utility vehicle (UV) segment.”
SYMC has been undergoing a corporate rehabilitation process since February 2009 and the court receivership will conclude upon court approval and the termination of restructuring.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataMahindra said it was committed to “nurturing the Ssangyong brand in global markets while preserving its Korean heritage. It is intended that SYMC will continue to function as an independent entity with primarily a Korean management. The acquisition will offer financial stability to SYMC and the two companies will work to further strengthen Ssangyong’s product portfolio across the globe. The inherent strengths of Ssangyong combined with Mahindra’s expertise will help in building a global SUV major.”
The labour unions of SYMC and M&M and SYMC have also signed a tripartite agreement which contains provisions for employment protection, long-term investment and commitment for no labour dispute.
M&M said its products and Ssangyong’s complement each other, “providing an opportunity to create distinct positioning. The wide sales and distribution networks and complementary product lines will provide access to many overseas markets for both companies.”
Definitive agreement
The definitive agreement contains information related to securing outside investment, the establishment of principal management, repayment of rehabilitation claims to protect the interests of creditors, such as creditors and shareholders, and establishing a foothold for SYMC “normalisation”.
The total cost of acquisition is US$463m with $378m in new stock and $85m in corporate bonds. Mahindra will acquire a 70% stake. The agreement also encapsulates terms and conditions related to the process of acquiring new stock and corporate bonds, down payment and deposit guidelines, repayment of rehabilitation claims, employment guarantees, and other covenants. M&M has already deposited 10% of the final purchase price under terms of the agreement, with the remaining balance to be deposited three days prior to SYMC’s stakeholder meeting. SYMC will update its corporate rehabilitation plan to include reference to repaying liabilities with cash from the deal and will be required to receive approval from creditors and the court on the updated plan. After completing all the acquisition procedures and the repayment of rehabilitation claims, the corporate rehabilitation process is likely to be finished by March 2011.
The next steps
• January 2011 : Approval of revised corporate rehabilitation plan by creditors
• February/March 2011 : Completion of acquisition
Reuters noted that, after a dismal 2009 and nearly two months of strikes to block layoffs, Ssangyong, which makes Rexton and Kyron SUVs and the Chairman luxury sedan, has seen a steady recovery in earnings, helped by new model launches and asset sales.
It sold a record 7,447 cars last month and expected record sales for November. Long-term prospects are also improving, as it expects Mahindra to help increase foreign sales and new model developments.
The deal marks a third change of main shareholders 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, but both failed to grow the automaker to challenge Hyundai.
Analysts said the deal gives Mahindra access to advanced technologies and a position from which it can launch its global ambitions, but integration with a company that has a history of labour disputes would be a tough task.
“Being in that market, proper focus and handling human resources will be key challenges for Mahindra,” said Vaishali Jajoo, a sector analyst with Indian brokerage Angel Broking.
“In the long term, this will provide a big brand to their portfolio. It will also give them the global presence that they have been looking for, besides access to Ssangyong R&D capability and technology.”
