Mahindra and Mahindra's bid for Romanian tractor company Tractorul Brasov seems to have run into rough terrain with the negotiation process being suspended on uncertainty over retirement of the company's debt by the Romanian government.
"The negotiation process has been suspended because of the uncertainty of resolving the issue of state aid," M&M said in a statement.
The state-owned Tractorul, which is being pursued by the Mahindras since 2005, had an accumulated past liability in excess of euro180 million.
M&M had been requesting the Romanian government to write off the liabilities. However, it said that absence of "sufficient guarantees that the state aid would be unconditionally approved by the Competition Council and would not be subsequently challenged by the European Commission" remains the main concern in the progress of the negotiation.
The Indian tractor major, however, emphasised that it has "maintained its interest" in acquiring controlling stake in the Romanian company.
The Romanian government has 80 per cent stake in Tractorul and the privatisation process is being negotiated by state asset sales agency AVAS.
According to a statement on the agency's website, AVAS Pesident Razvan Orasanu told Tractorul labour union that talks with M&M would continue till May 31, the day its offer expires.
"During the negotiation process carried out with Mahindra & Mahindra, AVAS was confronted with a series of difficulties set off by panic-mongering statements of some political and trade union leaders, who had a bearing on the privatisation process, and also with a continuous threat that Tractorul Brasov might have enforcement procedure applied upon it," Orasanu was quoted as saying in the statement.
This is the second major setback for M&M in Romania after it pulled out of bidding for Universal Tractors due to a change in the bidding process. In 2003, it lost to US tractor giant AGCO who beat M&M to buy Finnish tractor maker Valtra.
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