What did Jeco Holdings like about M&M?

28 September 2006

Mahindra & Mahindra has signed a pact to buy 67.9 per cent stake in German component manufacturer, Jeco Holdings. The deal has been struck at an enterprise value of €140 million.(See: M&M to acquire 67.9-per cent stake in German forging company Jeco Holdings)

Hemant Luthra, president of Mahindra Systems and Automotive Technologies, MSAT, Oliver Scholz, member, supervisory board of Jeco Holdings and Thomas Wahner, CEO of Jeco Holdings give the details of the deal as well as how the two entities plan to grow together. CNBC-TV18 shares with domain-b its exclusive interview with Luthra, Wahner and Scholz:

You picked up only 68 or 69 per cent stake in this company. What made it such a compelling or attractive acquisition in that sense that you are willing to do just 68 per cent and not 100 per cent anywhere else?
Luthra: I do not know why do you think it's just a 100-per cent stake that makes sense. You have got the management, prior owners and even the customers, who are committed because they see a familiar face. So to earn 67-per cent stake makes perfect sense to us, particularly when the partner too wants to partner with you to grow the company.

You have been looking at a lot of other acquisitions within the space. Then why did you choose this company only?
Luthra: Firstly, it is because of value systems. When we started discussions with Thomas and Oliver, we found that the same kind of value system. They have been committed to growth, to professionalism and they had a strong track record of making it a profitable company.

Secondly, they own intellectual property for high-margin products. Third, 50 per cent of their production is machined that gives value addition. Fourth, they have got a set of equipment, which is completely complimentary to what we have in Stokes and MASL (Mahindra Automotive Steels Limited). So it just took 16 months to do it, but it panned out.

Your company or your family has promoted this company many years ago, why did you choose to divest some of that stake and sell out?
Scholz: We want global growth and that was the reason why we took the chance to go along with Mahindra because Mahindra gives us this global growth. We were therefore able and ready to go into minority.