M&M to buy 13.5% in Spain's CIE for Rs 740 cr

In a bid to extend its reach into new markets, farm equipment-to-aerospace conglomerate Mahindra & Mahindra (M&M) said on Saturday that it is taking a 13.5 per cent stake in Spanish auto components maker CIE Automotive.

The deal will make M&M the second largest shareholder in CIE, the company said in a filing to the Bombay Stock Exchange. 

As part of the transaction, CIE Automotive, through its subsidiary Autometal, will acquire from Mahindra Group a stake in its listed and unlisted companies belonging to the Systech Automotive Component business while CIE Automotive will contribute its forging businesses in Spain and Lithuania and together consolidate all companies under Mahindra Forgings Ltd — which will be rechristened Mahindra CIE. 

M&M will now nominate two directors to the CIE board. With this, M&M will consolidate all Mahindra Systech Auto Component Companies and CIE European Forgings into one listed entity in India.

Anand Mahindra, chairman of the $16-billion Mahindra Group said the agreement will see the formation of a global automotive component supply network with combined annual sales of approximately Rs 15,000 crore with operations in North America, South America, Europe and Asia held through listed businesses in Spain, Brazil and India. 

Mahindra CIE will continue to be listed on the BSE and NSE. The share sale by Mahindra will trigger open-offer provisions under Securities and Exchange Board of India regulations. The transaction will be carried out in a series of steps over the next year.

"Eight years ago, we at Mahindra set out to build an Indian automotive supplier with a global footprint and this drove a series of acquisitions in India and Europe for us. We have been listening closely to our customers who have asked to step up our globalisation efforts and follow them around the world,” Mahindra said.

Noting that India has emerged as a key global production hub for small cars, CIE Automotive Chairman Anton Pradera said that the deal would help the company develop India as its gateway to the Asian market. 

Hemant Luthra, president of Mahindra's Systech Sector, said that Systech’s businesses are the result of acquisitions and alliances struck around the world. “This alliance with CIE marks the next step towards global supplier consolidation,” he said.

Kotak Investment Banking acted as financial advisor to the Mahindra Group for the transaction.