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Mahindra denies bidding for Volvo news
11 December 2008

The $6.7-billion Mahindra Group has denied media reports that it is planning to bid jointly with private investment companies, Cerberus Capital, the 79.8-per cent owner of Chrysler and Texas Pacific Group for Swedish car brand Volvo owned by Ford Motor's Premier Automotive Group that had previously owned Aston Martin, Jaguar and Land Rover.

Yestarday, Hindustan Times reported that the company was in discussions with private-equity players including Cerberus Capital and Texas Pacific Group to place a joint bid.
The Mumbai-based automaker said in a statement that, "We would like to categorically state that we are not bidding for Volvo and that these reports are purely speculative in nature."

The media had reported earlier citing investment banking sources that Mahindra was on the lookout for an advisor and was holding talks with Standard Chartered and Morgan Stanley to bid for Volvo jointly with Cerberus Capital and Texas Pacific Group.

It also said that JP Morgan, the advisors for Ford, had approached M&M as part of its Asian search along with Shanghai Automotive Industry Corporation and South Korea's Hyundai to explore their interst in acquiring Volvo.

M&M had said earlier that it was "always looking for acquisitions" but with the decline in sales in the domestic market due to the global economic slowdown "had to assess how to finance our mergers and acquisitions in times like these."

According to media reports Ford, which had acquired Sweden's ailing Volvo Car Corp in 1999 for $6.4 billion, has put a $6-billion sales tag for Volvo.

Ford Motors is among the Big 3 Detroit auto makers seeking a $34-billion bailout from the US government. However, unlike GM and Chrysler, Ford is not looking for a bailout but is only seeking a $9-billion federal line of credit, being better placed than the other two. Ford says it will utilise the loan only if market conditions worsen or if any of the big two went bankrupt, putting additional pressure on the company. (See: GM, Ford, Chrysler hike bailout plea to $34 billion)

Ford had been looking to sell Volvo since May 2007 when there was speculation that BMW of Germany may acquire the company although Ford had denied it at that time. (See: Ford denies Volvo sell-off talks)

Europe's largest automaker Volkswagen and Spanish car maker Seat were also approached about buying Volvo last year, but declined interest.

Volvo had been making losses and losing market share and speculation has been mounting that after sucessfully divesting Jaguar and Land Rover to Tata Motors, Ford was keen to sell-off Volvo in November last year but changed its mind and went to restructure it instead.

In October, Ford announced another round of 4,000 job cuts worldwide at Volvo following its earlier round of 2,000 job cuts in June 2008 citing a rapidly deteriorating auto market. (See: Ford Motor axes 4,000 jobs at Volvo)

Cerberus Capital, among the world's richest and most secretive private investment companies, has been seeking aid from the US government, via a $7-billion bridge loan and an additional $6 billion from the US Department of Energy to bring out more fuel-efficient vehicles.

Texas Pacific Group, which manages more than 34-billion of capital, has the financial power to bid for Volvo and is familiar with the car industry as it was one of four private investment companies to have made preliminary approaches for Jaguar and Land Rover last year before Ford finally sold it to Tata Motors.

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Mahindra denies bidding for Volvo