Mahindra and Mahindra, the world's largest tractor maker by volumes on Thursday, signed a definitive agreement to acquire 33% stake in Mitsubishi Agricultural Machinery (MAM) for $25 million or Rs.160 crore. Mahindra and Mahindra will acquire a significant 33% voting stake in the subsidiary of Mitsubishi Heavy Industries through fresh issue of common shares and Class A (non-voting) shares of Mitsubishi Agri Machinery .The deal will be closed by October 1, 2015 with funds infused by the Indian company , which will go into expanding the capital base of the Japanese company .
Mahindras have an old association with Mitsubishi Agricultural Machinery . The Japanese company has been supplying tractors to M&M's US subsidiary in addition to sharing technical licence for walk-behind rice transplanters and a tractor.
MAM had revenues of $408 million in 2014-15, and with M&M's equity infusion, it will mostly be debt free. MAM makes losses at the net level, but a higher capacity utilisation of the plant will help the company make it profitable. The Japanese firm has a roster base of 1,700 employees.
The acquisition of a sizeable stake will help Mahindras work closely with its Japanese partner to devise appropriate product portfolio strategy for the overseas markets. Apart from penetrating deeper in the US market, this strategic tie-up will help Mahindra reach out more effectively to markets of China, South East Asia and Eastern Europe. The tie-up will provide a platform for both companies to leverage technology and product development synergies. And both the partners will work towards common sourcing to bring down the cost.
Goenka said the company needs to get a better balance in terms of its volumes spread, with 90% of its business coming from India.The acquisition stake will help the company increase its presence in overseas markets Goenka says while the company is the largest selling tractor company in the world, in terms of revenues, it is at number five. In order to climb up the revenue ladder, the key is to push the farm machinery business globally . “Tractors only makes up for one-third of global farm machinery business, implements and machineries like riceplanters etc. make up for a big business,“ said Goenka.
Mahindra is also likely to launch a lighter tractor in India with the help of Mitsubishi next year, which will help the company cater to a 20,000 units per annum market for orchards.
Mahindras have an old association with Mitsubishi Agricultural Machinery . The Japanese company has been supplying tractors to M&M's US subsidiary in addition to sharing technical licence for walk-behind rice transplanters and a tractor.
MAM had revenues of $408 million in 2014-15, and with M&M's equity infusion, it will mostly be debt free. MAM makes losses at the net level, but a higher capacity utilisation of the plant will help the company make it profitable. The Japanese firm has a roster base of 1,700 employees.
The acquisition of a sizeable stake will help Mahindras work closely with its Japanese partner to devise appropriate product portfolio strategy for the overseas markets. Apart from penetrating deeper in the US market, this strategic tie-up will help Mahindra reach out more effectively to markets of China, South East Asia and Eastern Europe. The tie-up will provide a platform for both companies to leverage technology and product development synergies. And both the partners will work towards common sourcing to bring down the cost.
Goenka said the company needs to get a better balance in terms of its volumes spread, with 90% of its business coming from India.The acquisition stake will help the company increase its presence in overseas markets Goenka says while the company is the largest selling tractor company in the world, in terms of revenues, it is at number five. In order to climb up the revenue ladder, the key is to push the farm machinery business globally . “Tractors only makes up for one-third of global farm machinery business, implements and machineries like riceplanters etc. make up for a big business,“ said Goenka.
Mahindra is also likely to launch a lighter tractor in India with the help of Mitsubishi next year, which will help the company cater to a 20,000 units per annum market for orchards.
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