M&M to buy out Navistar stake in JVs for Rs 175 cr
18 December 2012
press trust of india
NEW DELHI, 18 DEC: Homegrown auto major Mahindra & Mahindra today said it will buy out its US-based partner Navistar Group from their two joint ventures for manufacturing of truck and buses, and engines for Rs 175 crore.
As part of the deal that is expected to be completed by January-February next year, Navistar Group will continue to supply technology to Mahindra & Mahindra, while it will also continue to use M&M's engineering services support for its US market.
“This is a friendly buyout as Navistar has decided to focus on their immediate priorities. Overall, we will be paying around Rs 175 crore for their stake in the two joint ventures,” M&M president (automotive and farm equipment sectors) Pawan Goenka said.
M&M and Navistar had set up a joint venture to manufacture trucks and buses in India ~ Mahindra Navistar Automotives Ltd (MNAL) in 2005. This was followed by another JV ~ Mahindra Navistar Engines Pvt Ltd (MNEPL) ~ in 2007 for producing engines.
In both the JVs, M&M had 51 per cent stake and Navistar had the remaining 49 per cent. The two partners have put in a total of over Rs 1,065 crore in the two joint ventures so far. The trucks and buses JV is still a loss-making entity.
Following the buyout, both MNAL and MNEPL would become wholly-owned subsidiaries of M&M, which will take complete ownership of operations and continue to sell MNEPL and MNAL products.
“The sale, which requires regulatory approval in India, is subject to the conclusion of definitive agreements, and is expected to be completed in early 2013,” M&M said.
Asked about the future roadmap for M&M in terms of technology for the trucks and buses business, Mr Goenka said: “MNAL has a completely independent R&D centre and this will continue to be so. Also, as part of our agreement, we have an indefinite licence from Navistar for engines and they will continue to supply us the technology even when we move to higher emission norms. So, there is absolutely no worries on that front.”
Commenting on the development, Navistar president and chief operating officer Troy Clarke said: “While the Indian market has not expanded as we had originally expected and industry challenges there continue in the near term, we still see promise in India going forward. But given Navistar's 2013 priorities, our capital and focus needs to be allocated to other business opportunities in the near term.”
Mr Goenka further said M&M would continue to be the partner of preference for Navistar in export markets.
“At present we are discussing exports of our CVs to South Africa and they will be partners in distribution,” he added.