A day after buying 55.2% stake in Reva Electric Car Company, Mahindra & Mahindra (M&M) is reportedly eyeing the financially-battered South Korean car maker Ssangyong Motor. According to a report in Korea Economic Daily, M&M has already shot of a letter to Ssangyong evincing interest in acquiring a majority stake in the company. Though Ssangyong has confirmed that there are companies looking to buy a stake, it has so far not diclosed names of interested parties. Mahindra & Mahindra will have to send a letter of intent by May 28 as per a court deadline regarding the sale.
With 10% owned by Chinese auto company Shanghai Automotive Industry Corporation (SAIC), Ssangyong is in the midst of a court-approved turnaround plan. Following the slowdown, Ssangyong is desperately looking for a buyer to stay afloat with fresh capital.
According to the plan, approved by a court in December last year, the company was to convert almost $1 billion of debt into new shares. New stock would account for 50.1% of all shares and open bids would be invited. The court has set May 28 as the deadline for a letter of intent.
The report also said there are other Korean companies that would bid for the auto company. However it is likely that M&M would be the only overseas bidder.
Ssangyong has said it will announce the plan for auction next month. The preferential bidder would be decided in August and the final decision would be taken in October.
M&M has been on the lookout for acquisitions to foray into newer geographies and could benefit immensely from the deal. According to an auto analyst, who did not wish to be named, the South Korea firm could give the company an opportunity to break into the Chinese market ? which is growing at a faster pace than the Indian market.
Ssangyong Motor, that makes Rexton and Kyron SUVs and the Chairman sedan, more than doubled its sales last month and is expected to create record sales in May. In 2004 SAIC bought a majority stake of 51% in the company but steadily reduced its stakes to 10%.