Mahindra & Mahindra (M&M) entered into an agreement with the Sumitomo Corporation, Japan, and SML Isuzu for acquiring 63,62,306 equity shares, representing 43.96% of the equity share capital of SML Isuzu. The share would be acquired at Rs 650 apiece and the aggregate consideration for the same would be Rs 413.55 crore.
M&M has also inked an agreement with Isuzu Motors, Japan, for acquiring 21,70,747 equity shares (representing 15% stake in SML Isuzu) for a total consideration of Rs 141.10 crore.
In addition M&M launched an obligatory open offer to acquire up to 26% stake of SML Isuzu from eligible public shareholders. The shares would be acquired at Rs 1,554.60 per share, which is at a discount of 12.01% to the scrip's previous close of Rs 1,766.70, dampening investor sentiment and triggering a sell-off.
M&M stated that the proposed acquisition is a step towards establishing a strong presence in the '>3.5T' CV segment, where M&M has a 3% market share today, as compared to a 52% market share in the '<3.5T' CV segment. M&M's Trucks and Buses Division has made meaningful progress over the past few years.
"This acquisition will double the market share to 6%, with a plan to increase this to 10 - 12% by FY31 and 20%+ by FY36," M&M added.
Incorporated in 1983, SML Isuzu is engaged in the business of manufacturing and sale of light commercial vehicles (LCVs) and medium commercial vehicles (MCVs) in the automobile industry and has a product portfolio comprising buses, trucks, and specific application vehicles. It has a manufacturing facility located in Punjab, and a pan-India distribution network. The company reported operating revenue of Rs 2,196 crore and EBITDA of Rs 179 crore in FY24. It has profitable operations, frugal manufacturing, and strong engineering capabilities. The company reported an 80.2% decline in net profit to Rs 0.53 crore on a 14.1% decrease in net sales to Rs 331.80 crore in Q3 FY25 over Q3 FY24.
M&M said that SML offers significant potential to unlock value through synergies in cost, network, brand, manufacturing, talent, and product complementarities. The company’s Trucks and Buses business has developed strengths by tapping into technology, design & innovation, and sourcing from our auto business. Together, this would be a powerful combination.
Dr. Anish Shah, Group CEO & MD of the Mahindra Group, said: "The acquisition of SML Isuzu marks a significant milestone in Mahindra Group's vision of delivering 5x growth in our emerging businesses. This acquisition is aligned with our capital allocation strategy for investing in high potential growth areas which have a strong right to win and have demonstrated operational excellence."
Meanwhile, shares of M&M rose 1.70% to Rs 2911 on the BSE.