Mahindra & Mahindra (MM) has acquired a 100% stake in Erkunt Traktor Sanayii AS, a Turkish tractor player. It would also acquire up to 80% stake in the foundry business of Erkunt Sanayii AS (Erkunt Foundry). M&M would be investing Rs 800 crore for these acquisitions Rs 480 crore for 100% of tractor unit and Rs 320 crore for 80% of foundry unit. Erkunt Traktor is the fourth largest tractor brand in Turkey, with a 6% market share as of CY16. Turkey is fourth largest tractor market globally (volumes of 71k in CY16). The country is a large market for tractors, harvesters, implements and other machinery, with a total industry size of $3.5 billion. It produces 23 models of tractors in the 55-110HP range. In CY16, Erkunt sold 4,700 tractors with revenues of $88 million.
It has a strong brand image in Turkey, and is supported by a distribution network of 95 dealers. It has 326 authorized service locations across Turkey. Erkunt Foundry is a full service provider of castings and machined components for farm equipment, auto and construction equipment. It focuses on engine blocks, cylinder heads and transmission cases. It has a strong customer portfolio, including JCB, MAN, Ford and Deutz. The foundry unit recorded revenue of $47 million in CY16, with 75% of it coming via exports to EU, the UK and other countries. Foundry business, via its three plants, has capacity of 65,000 tonne of casting and 32,600 tonne of machining.
This is MM’s second acquisition in Turkey, with earlier one of Hisarlar in Jan-17. Hisarlar has a strong presence in agricultural machinery (45% market share in soil preparation equipment), tractor cabins (42% market share in tractor cabins in Turkey) and machinery components. In CY15, Hisarlar had revenues of $71 million. M&M is focused on expanding its global presence in the farm mechanization space (tractors + farm implements). This is its fourth global M&A/alliance in farm equipment (others being Mitsubishi Agri, Sampo Rosenlew and Hisarlar). MM is working towards becoming a truly global tractor and full-line farm machinery player, and is targeting to generate 50% of its FES revenues from global markets by FY19.