Automobile major Mahindra & Mahindra will acquire a 67.9 per cent stake in Jeco Holding AG, one of the top five forgings companies in Germany.
M&M executives did not divulge the actual acquisition value of the company, but said the enterprise value of Jeco was ¤140 million (Rs 830 crore). In addition, Jeco has a certain debt and liability component.
Around 90 per cent of the Jeco stock is held by the promoters, Scholz AG, and the remaining 10 per cent is with the management.
Jeco reported a revenue of ¤180 million for the year ended December 2005 and is a profitable company with surplus cash reserves. The company has the capacity to make 100,000 tonne of forged components a year.
"Jeco is a successful and financially strong company with a reputable customer base. The acquisition will synergise the M&M group's strategy to become a truly global player in the forgings space. This acquisition will result in the establishing of a significant footprint in Europe by serving M&M's customers from three locations, the UK, Germany and India," said Anand Mahindra, vice-chairman and managing director, Mahindra & Mahindra.
M&M nominees will replace two-thirds of the Jeco board, after the acquisition.
"M&M's eventual plan will be to merge Jeco with Mahindra Automotive Steel in the most shareholder friendly manner, bringing maximum value to its shareholders," said Hemant Luthra, president, systems and technologies sector, M&M.
Jeco has over 120 years of experience in making products like gear boxes, engines, steering and axle parts, hubs, gears and piston heads. Jeco's customers include DaimlerChrysler, ZF Group, MAN Nutzfahrzeuge, Volvo, Linde, Renault, Agco, Kessler and Kolbenschmidt.
The M&M group's automobile components business generates a revenue of $575 million. The company aims to reach $1 billion by 2010. One of the ways to achieve this target was through more acquisitions in future, said Luthra.
"The group is sitting on surplus cash reserves of Rs 2,000 crore, following last year's FCCB issue of $200 million. As and when we find potential companies in low-cost countries, which synergise with our operations, we will try for acquisitions," he said.
