Eicher Motors board accords approval to joint venture with Volvo
26 May 2008
Mumbai: Commercial vehicle manufacturer Eicher Motors has announced that its board has approved the draft agreement to enter into a joint venture agreement with Swedish truck major AB Volvo to carry on commercial vehicles business through Eicher's step down subsidiary Eicher Motors India Ltd.
In December 2007, Eicher Motors Ltd had signed a letter of intent with the Swedish auto makerto form a new, unlisted joint venture as a step down subsidiary of Eicher, in which the Indian company would hold a majority 54.4 per cent equity and consolidate its financials with itself. (See: Eicher Motors in joint venture pact with Volvo)
The joint venture will focus on distribution of commercial vehicles in India.
Eicher will transfer its commercial vehicles business along with the components and engineering design services business to this subsidiary at an enterprise value of $506 million.
The new business will have exclusive distribution rights in India for all present and future Volvo trucks in the Indian market.
The announcement in December had also said that Volvo would acquire an 8.1 per cent stake in Eicher Motors Ltd from the promoters. On 16 May, the Foreign Investment Promotion Board (FIPB) had cleared a proposal by AB Volvo to the aforementioned stake in Eicher Motors for $30 million.