Mahindra & Mahindra Agrees to Buy Controlling Stake in Korea's Ssangyong

[NINETY EIGHT REGENCY]

Mahindra & Mahindra Agrees to Buy Controlling Stake in Korea's Ssangyong

By Sookyung Seo - Aug 23, 2010 2:46 AM CT

Mahindra & Mahindra Ltd., India’s largest sport-utility vehicle maker, may jointly build new cars with Ssangyong Motor Co. if it takes control of the South Korean automaker.

The two companies will work together and share technology, said Pawan Goenka, president of Mumbai-based Mahindra’s automotive and farm-equipment division, speaking to reporters after the two companies signed a preliminary agreement concerning the acquisition in Seoul today. The Indian company will help Ssangyong “develop new product and modernize their lineups,” he said.

Mahindra, chosen as the preferred bidder for Ssangyong earlier this month, may revitalize the company after the Pyeongtaek, South Korea-based maker of Rexton SUVs failed under the control of its previous foreign owner. China’s SAIC Motor Corp., which bought a 49 percent stake of Ssangyong in 2004 for $500 million, was criticized by unions and small shareholders for not investing enough in the venture.

“Some people have doubts about Mahindra’s ability to revive Ssangyong after SAIC, which is a bigger company than Mahindra, failed to do so,” Ahn Soo Woong, a Seoul-based analyst at LIG Investment & Securities Co., said last week. “So far, Mahindra has shown strong commitment to the deal.”

Ssangyong rose 6.9 percent to close at 10,850 won in Seoul trading.

Global Expansion

Taking a stake in Ssangyong, which is operating under bankruptcy protection, may help Mahindra become a leading maker of SUVs, Goenka said.

“We believe that Ssangyong and Mahindra make a powerful combination to create a global SUV brand,” he said. The two will also benefit from their combined scale, he said.

Mahindra, based in Mumbai, didn’t disclose the size of its bid for Ssangyong, which has a market value of 396 billion won ($340 million), according to Bloomberg data.

MoneyToday, a Korean-language online newspaper, said earlier this month Mahindra offered 535 billion won for a controlling stake, citing an unidentified industry official.

Mahindra has a plan to invest about $2 billion over the next three years for product development and plant expansion, as well as acquiring a controlling stake in Ssangyong, Goenka said.

link:

http://www.bloomberg.com/news/2010-08-23/mahindra-signs-preliminary-agreement-to-purchase-stake-in-ssangyong-motor.html