The Hindu : Business : M&M to buy Jeco Holding

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Friday, Sep 29, 2006
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M&M to buy Jeco Holding

Staff Correspondent

The cost is estimated at Rs. 830 crore

MUMBAI: In the largest outbound acquisition in the auto component arena, Mahindra & Mahindra Ltd. (M&M), through its subsidiary, will acquire 67.9 per cent stake in Jeco Holding AG, one of the top five forging companies in Germany. The transaction has an enterprise value of about 140 million euros (Rs. 830 crore) but owing to other adjustments, the exact value will be frozen in due course.

Jeco Holding is a 120-year-old company with a primary focus on the truck, bus and trailer market. Its major products include gear-boxes, engine and axle parts, hubs, gears and piston heads. The company has a forging capacity of one lakh tonnes annually and a turnover of 180 million euros.

While 90 per cent of the shareholding in Jeco Holding is held by Scholz AG, the balance is held by the management.

The cost of acquisition will be funded through the proceeds of an earlier completed FCCB issue for $200 million by M&M. The company will benefit from the continued presence of the erstwhile shareholders and management of Jeco Holding in further building the business of Jeco. Thomas Korner will continue in his position as Chief Executive Officer of the company.

The 68 per cent stake will be transferred to Mahindra Automotive Steel Ltd (MASL) at a later stage but the board of MASL will be reconstituted to accommodate Jeco members and will comprise one-third Jeco members and two-thirds from M&M.

Anand Mahindra, Managing Director and Vice-Chairman, M&M, while addressing the media here on Thursday said, "with this acquisition, the Mahindra group has taken a decisive and important step towards creating a global class and global scale business in auto components. This creates a platform that enables us to pursue our vision of building the auto components business as one of the core businesses of the Mahindra group.''

The Mahindra group's auto components business as of now is around $550 million with Mahindra Forging contributing $350 million, Mahindra Ugine Steel accounting for $135 million, Mahindra Stamping $35 million, Mahindra Engineering $25 million and Mahindra Composite $10 million and, according to Mr. Mahindra, the auto components business of the group has set a goal of $1 billion revenue by 2010.

Hemand Luthra, President, Systems and Technologies Sector (Systech) said, "this transaction will result in our establishing a significant footprint in continental Europe.''

According to Mr. Luthra, "this acquisition is an important component of our strategy of building a global auto component business serving OEMs across geographies."

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