M&M named lead bidder for South Korean SsangYong

Mahindra & Mahindra has been named as the preferred bidder to buy SsangYong, the bankrupt South Korean automaker, and emerge as one of the world’s largest SUV makers with a combined turnover of over $4 billion. Mumbai-based M&M, the makers of Scorpio and Bolero utility vehicles, will sign an MoU with SsangYong in two weeks, follow it up with a due diligence in September and a definitive agreement in November or December, the two companies said on Thursday.
Buying SsangYong will give M&M access to products, technology and a 1,300-strong dealer network in markets such as Russia and western Europe.M&M will also get access to gasoline engine technology, which Ssangyong is developing. Though it is India’s largest SUV player, M&M lacks presence in the above-Rs 10 lakh segment, both in SUVs and cars. Products of the South Korean firm will now help plug the gap.
The two companies did not share details of the acquisition cost. Two people familiar with it said the company has bid close to $485 million. A large portion of the money will be used to settle SsangYong’s debts. SsangYong’s market value is about $370 million.
M&M intends to finance the deal through a mix of debt and equity, Mr Doshi added. The company currently has surplus cash of Rs 2,500 crore and a low debt-to-equity ratio of 0.4 times, so financing the deal should not be too difficult. SsangYong’s financial performance, after a disastrous run in 2009, has improved slightly. The firm has reduced its workforce to 4,200 from 7,800 and it has posted positive operating margins in the past two quarters. Monthly sales have moved past 7,000 units. SsangYong has a network of 1,300 dealers in 98 countries with more than 50% sales coming from western Europe and 25% from Russia. NM Rothschild and Samsung Securities acted as bankers to the transaction.