Shares of heavy vehicle maker SML Isuzu Ltd. crashed to the 10 percent lower circuit upon opening for trade on April 28, after auto giant Mahindra & Mahindra Ltd. (M&M) announced it would acquire a stake in the firm.
M&M entered into an agreement to acquire a 58.96 percent stake in SML Isuzu at Rs 650 per share, which is an outlay of Rs 555 crore to bolster its truck and bus business. In addition, M&M will make an open offer under SEBI's takeover regulations.
As part of the transaction, M&M will acquire the entire stake of 43.96 percent held by Sumitomo Corporation, the promoter of SML, and separately also acquire 15 percent stake held by Isuzu Motors Ltd, public shareholder of SML, for an aggregate consideration of Rs 555 crore.
M&M would also launch a mandatory open offer for acquisition of up to 26 percent stake from eligible public shareholders of SML in accordance with regulations.
At 10.10 am, shares of SML Isuzu were quoting Rs 1,596.1, down 10 percent, while Mahindra and Mahindra's stock price was 1.3 percent higher at Rs 2,900 per share.
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The acquisition will double Mahindra's market share in the trucks and buses segment of India's fast-growing economy to six percent, with a plan to raise that to 12 percent by fiscal year 2031, it said.
"The proposed acquisition is a step towards establishing a strong presence in the >3.5T CV segment, where M&M has a three percent market share today, as compared to a 52 percent market share in the <3.5T LCV segment, the automajor said in a statement.
Last month, commercial vehicle manufacturer Ashok Leyland denied claims that suggested the auto player was in talks to acquire a controlling stake in SML Isuzu. "Ashok Leyland would like to outrightly deny this news as factually incorrect," said the firm.
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