Mahindra Buying Out Navistar’s Share In Ventures
Mahindra & Mahindra Ltd. (M&M) and Navistar International Corp. announced today that Mahindra intends to purchase Navistar Group’s stake in Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL). Following the purchase, both MNAL and MNEPL would become wholly owned subsidiaries of Mahindra.
"While the Indian market has not expanded as we had originally expected and industry challenges there continue in the near term, we still see promise in India going forward," said Troy Clarke, president and chief operating officer of Navistar. "But given Navistar’s 2013 priorities, our capital and focus needs to be allocated to other business opportunities in the near term."
The terms of the proposed transaction call for Mahindra to pay approximately $33 million for Navistar Group’s stake in both ventures. The agreement allows Navistar to continue sourcing components from India while Mahindra would continue to provide engineering services to Navistar. Navistar group would continue to support M&M through a license agreement and extend necessary support to MNAL and MNEPL for the purposes of business continuity.
The sale, which is subject to the conclusion of definitive agreements, requires regulatory approval in India and is expected to be completed in early 2013. Mahindra would then take complete ownership of operations and continue to sell MNEPL and MNAL products.
"Since it was established in 2005, Mahindra Navistar Automotives Ltd. has created a niche for itself in the Indian CV industry," said Dr. Pawan Goenka, president, Automotive and Farm Equipment Sectors, Mahindra & Mahindra Ltd. "MNAL has set up a world class dealer and service network for trucks, which coupled with synergies with Mahindra’s dealer network gives us a significant opportunity to grow our presence in the truck market.
"In addition, the product has been well accepted as is evident from our high-ranking in the TNS customer satisfaction survey. M&M is committed to the success of the truck business."
Navistar and Mahindra entered into the MNAL joint venture in late 2005 to manufacture trucks and buses in India, source components and provide engineering services for the design and development of Navistar vehicle products. The MNEPL joint venture was formed in 2007 and began producing engines in 2010.