Tatas look to enter Swaraj via Sumitomo
Friday, 11 December 2009
MUMBAI, Dec 10 (Economic Times): Tata Motors, India's largest marker of commercial vehicles, is negotiating to acquire Japanese conglomerate Sumitomo's 53.5 per cent stake in Swaraj Mazda as it attempts to strengthen its position in the light commercial vehicle or LCV market which is all set to see the entry of new players such as GM and its Chinese partner SAIC and a joint venture between Ashok Leyland and Nissan.
An announcement may happen early next year, a person close to the development said, requesting anonymity. If the deal is consummated, Tata Motors will have to make an offer to the minority shareholders of Swaraj Mazda at the same price paid to Sumitomo, as required by rules governing company acquisitions in India.
The deal size, including the open offer, may be around Rs 2.50 billion, said the same person. Tata Motors' stake will go up to 73.5 per cent if the open offer, which has to be at least 20 per cent of the target company's equity capital, is fully subscribed.
Two private equity investors, CDC and Actis, which own 9.3 per cent and 7.7 per cent, respectively in the Punjab based company, are likely to participate in the open offer, if the Tatas buy Sumitomo's stake, as they are interested in selling their stake in the company and making a profit on their initial investments, said an industry analyst who did not wish to be named.
When contacted, a Tata Motors spokesperson said: "We do not comment on speculation." Sumitomo did not reply to a mail sent by ET.
Tata Motors has a marketshare of around 65 per cent in the Indian commercial vehicle segment. Its share of the LCV market is higher, at around 68 per cent. Swaraj Mazda, on the other hand, is a small player with a minuscule 3 per cent share in the Rs 90-billion LCV market, with a presence mainly in North India.
An announcement may happen early next year, a person close to the development said, requesting anonymity. If the deal is consummated, Tata Motors will have to make an offer to the minority shareholders of Swaraj Mazda at the same price paid to Sumitomo, as required by rules governing company acquisitions in India.
The deal size, including the open offer, may be around Rs 2.50 billion, said the same person. Tata Motors' stake will go up to 73.5 per cent if the open offer, which has to be at least 20 per cent of the target company's equity capital, is fully subscribed.
Two private equity investors, CDC and Actis, which own 9.3 per cent and 7.7 per cent, respectively in the Punjab based company, are likely to participate in the open offer, if the Tatas buy Sumitomo's stake, as they are interested in selling their stake in the company and making a profit on their initial investments, said an industry analyst who did not wish to be named.
When contacted, a Tata Motors spokesperson said: "We do not comment on speculation." Sumitomo did not reply to a mail sent by ET.
Tata Motors has a marketshare of around 65 per cent in the Indian commercial vehicle segment. Its share of the LCV market is higher, at around 68 per cent. Swaraj Mazda, on the other hand, is a small player with a minuscule 3 per cent share in the Rs 90-billion LCV market, with a presence mainly in North India.