Mahindra to Buy Cie Stake as Companies Join Components Arms

Mahindra & Mahindra Ltd., India’s most acquisitive manufacturer, will buy a 13.5 percent stake in Spanish auto-parts maker Cie Automotive SA as the two companies agreed to merge their component-supply businesses into a unit with annual sales of $3 billion.

Mahindra will pay 96.2 million euros ($128.4 million), or 6 euros a share, for the Cie stock. The Spanish company will take a majority stake in a single listed entity in India which will operate all of Mahindra’s Systech automotive component businesses globally and include Cie’s European forgings operations, Mahindra said in a statement.

“We set out to build an automotive supplier with a global footprint and achieved this by cobbling together a series of acquisitions,” Chairman Anand Mahindra told reporters in Mumbai today. “This alliance with Cie enables us to quickly extend our reach into new geographies. It’s a business with global scale.”

Mahindra’s stake in the merged entity will be “north of 20 percent,” according to Hemant Luthra, president of Mahindra Systech.

The agreement is Mahindra & Mahindra’s 36th stock purchase in the past decade, more than any Indian manufacturer, based on data compiled by Bloomberg, and the company has bid on assets ranging from luxury sports-car maker Aston Martin to aircraft producer Hawker Beechcraft Inc. Aside from being India’s largest maker of sport-utility vehicles, Mahindra & Mahindra has businesses ranging from financial services to holiday resorts.

Wider Footprint

“This is a strategic expansion of their portfolio,” Umesh Karne, an analyst at Brics Securities Ltd. in Mumbai, said before the announcement. “This will give them a wider footprint in Europe, and access to more clients. European markets aren’t doing that great right now, but going forward there will be a pick-up, so they’re going to see long-term benefits from this.”

Cie had market capitalization of 635 million euros at the close of trading yesterday. The 13.5 percent stake will make Mahindra the second-biggest shareholder. Risteel Corp. BV has 14.8 percent, according to data compiled by Bloomberg.

Mahindra is a conglomerate with 110 subsidiaries in finance, information technology, real estate and resorts and has a market value of 583 billion rupees ($10.1 billion). Mahindra in 2011 acquired 70 percent of South Korean automaker Ssangyong Motor Co.

The company had cash and short-term investments of 66 billion rupees as of March 31, according to data compiled by Bloomberg.

Mahindra’s shares rose 2.7 percent to 949 rupees in Mumbai trading yesterday, compared to a 1.9 percent rise in the S&P BSE Sensex index.

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