Source: Business Standard
MUMBAI, India — The Business Standard of India is reporting tractor maker Mahindra & Mahindra on Thursday said it had signed an agreement to buy 33% stake in agricultural machinery making company of Mitsubishi Heavy Industries for $25 million. M&M would get new common shares in addition to Class A (non-voting) shares of Mitsubishi Agricultural Machinery Co. (MAM) and four board positions.
The deal is expected to close by October 1. The two companies have committed on joint development of products, sharing of engines and transmissions, common sourcing of parts and reciprocal product access for respective strong markets. The two are open to cross-badging too, said a senior executive of M&M.
MAM is Japan’s fourth largest farm machinery manufacturer with revenues of $408 million in the last financial year and 1,700 employees. It sells tractors, combine harvesters, rice transplanters and other agri-machinery. Pawan Goenka, executive director, M&M, said, "India is not the primary driver of this acquisition. We bought stake in this company to explore global opportunities. It would be difficult for me to say which markets we would be targeting but we will look at the ASEAN markets.”
The two companies have a decade-long partnership in the U.S. where products of Mitsubishi have played a significant role in Mahindra's success. With this alliance, the companies will focus on making investments in marketing ad product development, said a statement.
The acquisition, though, will not change the global pecking order of tractor manufacturers. John Deere will continue to be the world's biggest (in revenue terms) followed by CNH while M&M will remain at number five.
M&M, however, will extend its lead over John Deere and hold the title of being the world's largest producer of tractors.
Goenka however said that there are no immediate plans to launch MAM tractors in India or hike its stake further in the company. M&M along with its partners is developing new 100-110 horsepower tractors for international markets. The company already sells 120 horsepower tractors in China, 100 horsepower in U.S., 90 horsepower in Africa and 57 horsepower in India.