M&M bags German forging firm Jeco. Check it out:
(The Economic Times (India) Via Thomson Dialog NewsEdge) : Mahindra & Mahindra (M&M) has struck a deal to buy out German forging company Jeco Holdings in the largest overseas deal in the auto component space so far.
M&M, through its component arm Mahindra Systems and Automotive Technologies, now rechristened Systech, acquired a 67.9% stake in German forging company Jeco Holdings, one of Germany's top five forgings companies, for an undisclosed amount. The enterprise value of the firm has been estimated at about e140m (Rs 830 crore), making it the largest outbound deal.
Jeco Holdings has three plants in Germany with a total capacity of 100,000 tonnes per annum and a turnover of e180m. However, there is no clarity on how much M&M is paying for its 67.9% share of Jeco's total equity. Kotak Investment Banking was the principal advisor to M&M on this deal.
M&M plans to integrate this company with its subsidiary Mahindra Automotive Steels (MASPL) at a later date and is currently in discussions with the Indian regulators to chart out a course of action for the same. MASPL holds M&M other forgings interests like the Chakan unit acquired from Amforge in '05.
"Jeco is a profitable company with a strong customer base and good capabilities for innovation so this is a sound investment in terms of returns to our shareholders. Jeco's presence in the European forgings market will help us build a global business in the forgings market," said Anand Mahindra, vice-chairman and managing director of M&M.
Mr Hemant Luthra, president of Systech added that "Jeco's assets, in terms of machinery is perfectly complimentary to what we have in Amforge and Stokes, giving us a global platform in Germany, UK and India to meet customer demands."
Jeco manufactures forgings for gear boxes, engine and axle parts, hubs, gears and piston heads and its activities are concentrated on the truck, bus and trailer market. Its main customers include DaimlerChrysler Group, ZF Group, MAN Nutzfahrzeuge, Volvo, Linde, Renault, Agco, Kessler and Kolbenschmidt.
"The cost scenario for our business is difficult in Europe so we were looking for a strategic partner to tie-up with. We see immense potential in our alliance with M&M as it is a technologically competent company with a strong base in India," said Mr Oliver Scholz, member, supervisory board of JECO Holdings.
"M&M's strategy for Jeco seems fairly straight forward. It will use Jeco for all the high-end work as European clients tend to be picky about where their critical parts are engineered. It may move some of the back-end and low-technology business to India to rationalise costs," said an industry analyst.
Copyright 2006 The Economic Times of India, Coleman & Co Ltd. Source : Financial Times Information Limited
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