Shares of SML Isuzu Ltd hit a 10% lower circuit on 28 April after Mahindra & Mahindra (M&M) said on Saturday that it has signed an agreement to acquire a 58.96% stake in SML Isuzu (SML) for Rs 555 crore. The initiative intends to grow M&M’s presence in the commercial vehicle (CV) segment beyond 3.5 tons, where the company now holds a 3% market share.
The transaction would be finalized for Rs. 650 per share. Following that, M&M will make a mandatory open offer under SEBI’s takeover processes to acquire up to an additional 26% interest from public shareholders.
M&M commands a 52% share of the sub-3.5T light commercial vehicle (LCV) industry. With this deal, M&M plans to boost its market share in the >3.5T segment to 6% initially, followed by 10-12% by FY31 and more than 20% by FY36.
SML Isuzu, founded in 1983, is a publicly traded company that operates trucks and buses throughout India. It has around a 16% market share in the intermediate and light commercial vehicle (ILCV) bus sector. In FY24, SML reported Rs 2,196 crore in operating revenue and Rs 179 crore in EBITDA.
As part of the acquisition, M&M will purchase a 43.96% stake from Sumitomo Corporation and a 15% holding from Isuzu Motors, both of which are existing shareholders in SML. The transaction is subject to regulatory approval, including from the Competition Commission of India, and is scheduled to be completed by 2025.
The acquisition is projected to result in operational synergies in manufacturing, cost control, supplier networks, and product development. M&M noted that its trucks and buses segment has achieved improvement in recent years and that the merger with SML is intended to improve manufacturing utilization and increase product offers.
Anish Shah, Group CEO and MD of Mahindra Group stated that the acquisition is consistent with the company’s policy of allocating money to firms with high growth potential. Rajesh Jejurikar, Executive Director and CEO of M&M’s Auto and Farm Sector stated that the acquisition would help Mahindra expand its product line while consolidating supplier and dealer networks.
Kotak Investment Banking is the open offer’s financial advisor and manager, and Khaitan & Co is M&M’s legal counsel.
Mahindra Group, founded in 1945, is present in over 100 countries and engages in fields like farm equipment, utility vehicles, information technology, and financial services.
Sumitomo organization, a Tokyo-listed integrated trade and business investment organization, is involved in the steel, automobile, construction, lifestyle, mineral resources, chemicals, and energy sectors.
At 2:07 pm, the shares of SML Isuzu were locked 10% lower at Rs 1,596.10 while the shares of M&M were trading 1.77% higher at Rs 2,915 on NSE.
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