M&M buys Ssangyong for $463 mn

HANDOUT RESTRICTED TO EDITORIAL USE AND EDITORIAL SALES - MANDATORY CREDIT "AFP PHOTO / Ssangyong Motor"<br />This handout photo taken on November 23, 2010 and received from Ssangyong Motor shows Pawan Goenka (R), president of Mahindra and Mahindra's Automotive and Farm equipment sector, shaking hands with Lee Yoo-Il (L) as Park Young-Tae (C), both court-appointed managers of Ssanyong Motor, looking on during a signing ceremony in Seoul. Indian carmaker Mahindra and Mahindra on November 23 signed a "definitive agreement" with receivers of Ssangyong Motor to take over the troubled South Korean auto maker. AFP PHOTO / HO / Ssangyong Motor

Mahindra & Mahindra (M&M) and Ssangyong Motor Company Limited (SYMC) of Korea on Tuesday signed a definitive agreement in Seoul for M&M to acquire a 70 per cent stake in SYMC. The agreement was signed by Yooil Lee and Youngtae Park, Joint Receivers of SYMC and Pawan Goenka, President, Automotive & Farm Equipment Sectors, M&M.

A statement from M&M said the total cost of acquisition is $463 million with $378 million in new stock and $85 million in corporate bonds.

M&M has already deposited 10 per cent of the final purchasing price as per the terms of the definitive agreement, with the balance to be deposited three days prior to SYMC's stakeholder meeting.

SYMC is undergoing a corporate rehabilitation process since February 2009 and the court receivership will conclude upon court approval and the termination of corporate rehabilitation process.

Mahindra is committed to nurturing the Ssangyong brand and 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. As a premier manufacturer of sports utility vehicles (SUV) and recreational vehicles (RV), SsangYong manufactures premium products in Korea. It has been manufacturing automobiles for more than five decades.

SYMC will update its corporate rehabilitation plan to include reference to repaying liabilities with cash-in 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 labour unions of SYMC, M&M and SYMC have signed a tripartite agreement which contains provisions for employment protection, long-term investment and commitment for no labour dispute.

According to Dr. Goenka, “The coming together of Mahindra and Ssangyong will result in a competitive global UV (utility vehicle) player.”