M&M, Spain's CIE Automotive in global alliance for auto components

The Mahindra Group today announced the signing of a multi-structured deal under which it will pick up 13.5 per cent stake in Spain's auto component maker CIE Automotive for 96.24 million euros (nearly Rs740 crore).

Under the global alliance signed today, M&M, in turn, will sell stakes in its three group firms for 87.5 million euro (nearly Rs673.68 crore) to Participaciones Internacionales Autometal Dos, SL, CIE Automotive SA and Autometal, SA.

The agreement also consolidates all Mahindra Systech Auto Component Companies and CIE European Forgings into one listed entity in India.

A committee of directors of the company at a meeting held today approved entering into of a share purchase agreement with Participaciones Internacionales Autometal Dos, SL, CIE Automotive SA and Autometal, SA, M&M said in a filing with the Bombay Stock Exchange.

The agreement will see the formation of a global automotive component supply network with combined annual sales of approximately Euro 2.2 billion ($3 billion/Rs15,000 crore) with operations in North America, South America, Europe and Asia held through listed businesses in Spain, Brazil and India, M&M said in a release.

As part of the transaction, CIE Automotive - through one of its subsidiaries - will acquire stake in Systech Automotive Component, an unlisted business of the Mahindra Group and CIE Automotive will contribute its forging businesses in Spain and Lithuania and together consolidate all companies under MFL which will be rechristened Mahindra CIE.

Mahindra CIE will continue to be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The share sale by Mahindra will trigger open-offer provisions under the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011.

The proposed business transaction will be carried out in a series of steps over the next year that will culminate in M&M taking a stake of 13.5 per cent in CIE Automotive, which is listed in Spain making it the second largest shareholder in CIE. M&M will nominate 2 directors to the CIE board.

It will also lead to CIE Automotive taking a major stake in a single listed entity in India, which will continue to operate the current Systech automotive component businesses globally and include CIE's European forgings operations.

"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. This grand alliance with CIE enables us to ''Rise'' above competition, quickly extend our reach into new geographies, and grow our collective product portfolio in the coming years,'' said Anand Mahindra, chairman of the Mahindra Group.

"CIE's leadership and shareholders have a strategy to develop India as the gateway to the Asian market. We have been impressed by the promise of the Indian automotive market and the growing emergence of India as a key global production hub for small cars. In Mahindra, we found a partner that has a multi-technology portfolio similar to ours and shares the same business values. So while we are happy to see CIE gaining an entry

to India, we are equally pleased to have M&M as one of CIE's largest shareholders," Anton Pradera, chairman of CIE Automotive, said.

Kotak Investment Banking acted as financial advisor to the Mahindra Group while Khaitan & Co and DLA Piper acted as legal advisors. 

GBP Legal and Amarchand Mangaldas were legal advisors to the CIE Group.