Ssangyong Motor Company Limited (SYMC) and India’s Mahindra & Mahindra Ltd.(M&M) its preferred bidder, announced the signing of a definitive agreement in Seoul. The agreement which was signed by Yooil Lee and Youngtae Park, Joint Receivers of SYMC and Dr. Pawan Goenka,President, Automotive & Farm Equipment Sectors, M&M, in the presence of key staff and advisors to both groups. “The securing of a solid partner who has both financial capability and is engaged in diverse markets will allow Ssangyong to emerge as a global SUV player through the strengthening of R&D, investments in product development, better business competitiveness and global sales expansion”, said Mr. Yooil Lee. “The coming together of Mahindra and Ssangyong will result in a competitive global UV player. Together with its financial capability, Mahindra offers competence in sourcing and marketing strategy while Ssangyong has strong capabilities in technology. We are committed to leverage the combined synergies by investing in a new Ssangyong product portfolio to gain momentum in global markets”, said Dr. Pawan Goenka. Dr. Goenka added, “There is also an opportunity to introduce a premium portfolio of SUVs in the Indian market,
providing a new growth avenue for Ssangyong and further strengthen our dominant position in the UV segment.” SYMC is undergoing a corporate rehabilitation process since February 2009 and the court receivership will conclude upon court approval and the termination of corporate rehabilitation process. Mahindra is committed to nurturing the Ssangyong brand in global markets while preserving its Korean heritage. It is intended that SYMC will continue to function as an independent entity with primarily a Korean management. The acquisition will offer financial stability to SYMC and the two companies will work to further strengthen Ssangyong’s product portfolio across the globe. The inherent strengths of Ssangyong combined with Mahindra’s expertise will help in building a global SUV major.
The labour union of SYMC, M&M and SYMC have also signed a Tripartite Agreement which contains provisions for employment protection, long-term investment and commitment for no labor dispute. There are strong complementarities between the Ssangyong and Mahindra portfolio of products, providing an opportunity to create distinct positioning. The wide sales and distribution networks and complementary product lines will provide access to many overseas markets for both companies.
The Definitive Agreement
The definitive agreement contains information related to securing outside investment, the establishment of principal management, repayment of rehabilitation claims to protect the interests of creditors, such as creditors and shareholders, and establishing a foothold for SYMC normalization. The total cost of acquisition is US$ 463 million with US$ 378 million in new stock and US$ 85 million in corporate bonds. Mahindra will acquire a 70% stake,
The definitive agreement also encapsulates terms and conditions related to the process of acquiring new stock and corporate bonds, down payment and deposit guidelines, repayment of rehabilitation claims, employment guarantees, and other covenants. M&M has already deposited 10 percent of the final purchasing price per terms of the definitive agreement, with the remaining balance to be deposited three days prior to SYMC’s stakeholder meeting. SYMC will update its corporate rehabilitation plan to include reference to repaying liabilities with cash-in from the deal, and will be required to receive approval from creditors and the court on the updated plan. After completing all the acquisition procedures and the repayment of rehabilitation claims, the corporate rehabilitation process is likely to be finished by March, 2011.
The next steps
?January 2011 : Approval of Revised Corporate Rehabilitation Plan by Creditors
??February / March 2011 : Completion of Acquisition
Exchange Rate Used: US $ I = KRW 1129
About Ssangyong Motors:
As a premier manufacturer of sports utility vehicles (SUV) and recreational vehicles (RV), SsangYong manufactures premium products in Korea. Founded in 1954, it has been manufacturing automobiles for more than five decades. In 1988, it developed a compact 4WD SUV, Korando Family, which was the first SUV manufactured in Korea. Since then it has established its reputation for innovation, leadership, and quality in the SUV field in Korea. Its next SUV the Musso was a great success in Korea and key export markets like Western Europe. In 1997, it launched a luxury passenger car, the Chairman. Since then it has launched a number of SUVs and a new luxurious version of the Chairman named Chairman W in 2008. Its latest SUV, a monocoque compact SUV, named Korando C was launched in export markets in October 2010. Ssangyong has a strong domestic network of over 130 dealers and exports to over 90 countries through over 1,200 dealers.
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