Kubota to increase stake in Escorts, make open offer at Rs 2,000 per share
Kubota, which has interests in tractors, earth movers and engines, will also make an open offer to Escorts shareholders to acquire up to 26 percent of the company’s share capital. The name of the company shall be changed to ‘Escorts Kubota Limited’.
November 18, 2021 / 02:38 PM IST
Japan's Kubota Corporation will raise its equity stake in tractor maker Escorts to 14.99 percent through a preferential issue aggregating to Rs 1,872 crore, further cementing its place in India, which is the world’s largest tractor market. The joint entity intends to attain global leadership in the farm equipment sector.
Kubota will subscribe to new equity share proposed to be issued by Escorts and shall become a joint promoter along with the Nanda family, the existing promoters of the company. A press release from Escorts stated that the Nanda family will not be selling any shares of the company in this deal. The transaction is subject to shareholder and regulatory approvals.
The name of the company shall be changed to ‘Escorts Kubota Limited’. Kubota, which has interests in tractors, earth movers and engines, will also make an open offer to the shareholders of Escorts to acquire up to 26 percent of the company’s share capital. The open offer will be made at the same price as the preferential issuance, Rs 2,000 per share. Kubota’s stake in Escorts will increase to 44.80 percent after the open offer.
“With a goal of making Escorts the exclusive vehicle of business in India and simplifying the corporate structure, Escorts and Kubota have decided to take necessary steps to evaluate and consider the feasibility of merger of Kubota’s subsidiaries in India where Escorts is also a partner (Kubota Agricultural Machinery India and Escorts Kubota India) into Escorts, subject to necessary approvals,” the statement said.
The deal will lead to Escorts housing a ‘major R&D and Innovation Centre’ besides being the exclusive vehicle for manufacture and sale of certain products in India and sourcing from India.
Escorts board has agreed to evaluate and consider the feasibility of cancellation of all residual equity stake of Escorts held by the Escorts Benefit and Welfare Trust without payment of any consideration and the merger of Escorts Finance into Escorts.
Nikhil Nanda, Chairman and Managing Director of Escorts, will be a non-employee with the proposed designation of senior managing executive officer and general manager of value-innovative famer and industrial machinery strategy and operations of Kubota. There is also the proposal to induct him as a director of the board of Kubota’s European business holding company.
Nanda’s non-employee involvement in the foregoing capacity will not interfere with his role as the CMD of Escorts. There will be no remuneration payable to him for these services, the statement added.