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M&M eyes mega US acquisition

The $3 billion Mahindra & Mahindra group is all set to make a mega acquisition in the United States in the auto-engineering segment.

india Updated: Jul 31, 2006 02:47 IST
Arun Kumar

The $3 billion Mahindra & Mahindra group is all set to make a mega acquisition in the United States in the auto-engineering segment. According to highly-placed sources, the deal size would be in the vicinity of $500 million and is expected to close shortly.

Hemant Luthra, president of Mahindra Systems & Automotive Technologies, when contacted, refused to comment on the issue. He, however, said the group was looking at acquiring an engineering company in the US and a tractor company in China. “We are conducting due diligence at many companies in US, Europe and China,” he said. 

In addition to this, the company is also in advance stage of acquiring a listed company in India, which is engaged in the forging business, sources said. “The Indian acquisition should be in the vicinity of Rs 150 crore,” they said.  As the company is cash surplus, all these acquisitions will be funded through a combination of internal accrual and loans, sources said.

Sources in the investment banking said the company has already completed the due diligence for the US acquisition and the negotiation was in final stage. “In all probability, the deal is expected to be closed by August end unless some unforeseen event happened,” they said.

Sources in Mahindra said they are aggressively looking at acquisitions in the developed market particularly in the auto ancillary segment. “This would give them captive clientele and good technology, which can be leveraged by the existing operations of the company,” they added.

The auto major has set an aggressive target of reaching billion dollar revenues by 2010, which is not possible through organic growth, although company is growing aggressively. “In fact, the company is looking at the mix of big-ticket and small-size acquisitions simultaneously. So that it can blend and synergise the operations at global scale, sources said.

The acquisition of engineering company is key for the growth of auto ancillary business, they said. “The agenda is to achieve the critical mass and become reliable and sustainable to provide services to the major auto giants globally. Although the group itself has also the proven technology, but it will take time in case it want to widens its offering range,” sources said and added further that the acquisition will help the company in squeezing the timeline.

Once the ancillary business achieves the critical mass, it will be hived off from the flagship company–Mahindra & Mahindra, sources said.