Mahindra & Mahindra on have completed the acquisition of a majority stake in South Korea’s SsangYong Motor Company (SMC). Mahindra, which emerged as the preferred bidder for SsangYong in August 2010, will now hold a 70% stake in SMC, for which it has shelled out US$ 463 million (about Rs. 2,105 crore).
With the new management taking control, SMC will invest over 240 KRW (nearly Rs. 960 crore) this calendar year on product development and brand building.
The firm will increase investment in product development by 70% in 2011, as compared to last year, at over KRW 200 billion (over Rs 800 crore). It will also invest over 40 billion KRW (about Rs 160 crore) for brand building in Korea – a 60% increase over 2010 – and increase overseas brand investment by over four times in 2011.
These investments will be funded by SMC’s internal accruals. After the debt restructuring SMC’s balance sheet is clean.
Mr. Pawan Goenka ,President for Automotive and Farm Equipment sectors has been appointed as the Chairman of the newly acquired Korean firm SsangYong Motor Co. SMC’s new CEO is Yoo Il Lee and Dilip Sundaram from M&M has been appointed as the Korean firm’s new CFO.
Official Press Release:
Mahindra & Mahindra Ltd. (M&M), India’s leading manufacturer of utility vehicles, today announced that it has completed all formalities related to the acquisition of a majority stake in SsangYong Motor Company (SYMC) and that the company is no longer in Court Receivership. Mahindra had emerged as the preferred bidder for SsangYong in August 2010.
This marks the beginning of a new journey for SYMC and will also pave the way for both Mahindra and SYMC to emerge as a strong force allied together in the global passenger vehicle industry, through their strategic partnership.
Present on the occasion were Mr. Bharat Doshi, Executive Director & Group CFO, Mahindra & Mahindra Ltd. and Dr. Pawan Goenka who is President of Mahindra’s Automotive and Farm Equipment Sectors. Key officials from the Mahindra Group and SYMC were also present.
For Mahindra, the biggest benefit from this partnership will be the opportunity to harness synergies between the two companies, while protecting their respective brand identities and ensuring quality. Towards this end, a Synergy Council comprising of senior management from both companies will be established to ensure focus and delivery of synergies between the two companies. The Council will focus on various aspects such as global procurement, new car development and business strategy to penetrate international markets.
Strategic plans such as the India project which involves launching the Rexton and Korando-C in India have already been kicked off. Also under discussion are opportunities for joint product and technology development and synergy in global operations and purchase. Mahindra has a strong IT system that is being reviewed for suitability for SsangYong. The company is also considering the possibility of Mahindra Finance setting up operations in Korea to enhance the sales of SsangYong vehicles.
Mahindra has also proposed the following five point agenda for SsangYong:
Strengthening the product pipeline
Harnessing synergies between the two companies
Investing in the SYMC brand
Building human resources
Focusing on financial stability
SsangYong has also proposed the following investments:
In 2011, the business plan calls for a 70% investment increase in product development, as compared to last year, at over KRW 200 billion
Over 40 billion KRW for brand building in Korea – a 60% increase over 2010 – and an increase in overseas brand investment by over four times, in 2011.
Dr. Pawan Goenka, President, Automotive and Farm Equipment Sectors, Mahindra & Mahindra Ltd., mentioned that Mahindra was extremely conscious of SYMC’s Korean heritage and would only want to enhance it. SsangYong will be an independently run Korean company – with largely Korean Management – and will remain a ‘Made in Korea’ Brand.
He also announced that the new CEO of SYMC will be Mr. Yoo-il Lee, while Mr. Dilip Sundaram from Mahindra will be the new CFO. He also announced the names of the new Board of Directors of SsangYong Motor Company.
“This is a landmark day for all of us at Mahindra as it marks the beginning of what I am sure will be an enduring partnership with SsangYong Motor Company. I would like to thank all the employees of SsangYong as well as the company’s creditors for the help and cooperation extended to us during this long process.
As one of the country’s premier automotive companies, SsangYong brings with it a rich legacy of R&D and innovation. This legacy, coupled with the synergies between the two companies in the areas of R&D, product development and platform sharing, will make the combined entity of Mahindra and SsangYong a force to reckon with in the global utility vehicle space. We are committed to nurturing the SsangYong brand in both the Korean and global markets and returning it to its days of glory,” said Dr. Pawan Goenka.
“Mahindra brings with it a great deal of passion, domain expertise and knowledge of the global UV market, as India’s leading utility vehicle (UV) manufacturer. All of us at SsangYong look forward to working closely with the Mahindra team to help develop a new product portfolio and gain momentum in overseas markets,” said Mr. Yoo-il Lee, CEO, SsangYong Motor Company.
“I would like to thank both joint-receivers, Mr. Lee and Mr. Park, who were involved in the day to day operations of the company and who ensured that SsangYong stood up to the challenge through the entire rehabilitation period,” Said Mr. Bharat Doshi, Executive Director & Group CFO, Mahindra & Mahindra Ltd. “I would also like to express gratitude to the Seoul Central District Court which handled this daunting task and guided SsangYong throughout this process,” he added.