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Tata Motors buys Daewoo unit

By Our Staff Correspondent

MUMBAI, FEB. 18. Tata Motors today announced that it signed the Investment Agreement for the acquisition of Daewoo Commercial Vehicle Company Ltd. (DWCV) for a total price of 120 billion Korean won (about $102 million or Rs. 465 crores). This is being financed equally through Tata Motors' equity in DWCV and direct lending facilities to DWCV.

The price includes the perpetual and exclusive right to use Daewoo trademarks in Korea and overseas markets for the product range of DWCV.

The agreement follows the completion of due diligence by Tata Motors as per the binding memorandum of understanding signed between the two companies on November 5, 2003 and the culmination of a successful Special Collective Bargaining Agreement between the management and the union of DWCV, recognising the change in ownership of the company.

Ratan Tata, Chairman, Tata group, said, "This is indeed a major step for Tata Motors and a milestone for the group in its quest for globalisation. I am confident that both companies will derive considerable benefits from this agreement".

DWCV is Korea's second largest heavy truck maker with a modern plant in Kunsan that has an annual production capacity of 20,000 medium and heavy vehicles. It enjoys a market share in excess of 25 per cent in the Korean heavy truck segment. Both Tata Motors and DWCV believe that they can extract significant synergies in several areas such as marketing, research and product development and other operational areas.

Ravi Kant, Executive Director (Commercial Vehicle Business Unit), Tata Motors, said, "The complementary product range of the two companies and strengths in product development and international marketing will open new opportunities for both companies. We are excited at the possibilities of this co-operation and will now work towards a successful integration with the commitment of the management and the dedicated workforce of DWCV".

Tata Motors' capacity is two lakh units annually and while it makes vehicles in the 200 hp range, the Daewoo facility can make vehicles in the 200-400 hp range.

The acquisition of DWCV is subject to the approval of an amended reorganisation plan for the company that reflects the terms of the Investment Agreement by the creditors and shareholders of DWCV and the Incheon District Court and is expected to be completed by March 2004.

Last month, while announcing the third quarter results of Tata Motors, Mr. Ravi Kant had indicated that Tata Motors was also eying the Chinese market given that the commercial vehicle industry in China is two million units strong and is likely to become a three million unit industry this year. Tata Motors is on the lookout for a good partner and is open to a whole range of partnerships in China, Mr. Ravi Kant said.

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