M&M plan to acquire Gujarat Tractor opposed

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In yet another instance of a takeover target company's employees trying to prevent acquisition by a rival organisation, the employees of the Gujarat Tractor Corporation have opposed takeover of this state public sector unit by Mahindra & Mahindra.

They have approached a Vadodara court saying M&M's offer of Rs 15.6 crore for the plant is not adequate to cover the price of the large plot of land on which the plant is situated. They have been joined by some members of the public. The M&M management contends that the land is part of the deal.

Mahindra & Mahindra wants to acquire the plant in order to enhance its capacity to take on other players in the market, including multinationals, who have recently entered India. The plan has made against a backdrop of rising tractor sales, especially in the small and medium range.

The Mahindra group company has registered high sales growth. Its July 1999 sales were 50 per cent higher than the July 1998 level. The acquisition of the Gujarat plant, Mahindra & Mahindra feels, will help it retain its dominant position in the Indian tractor market. In spite of increased competition, the company continues to be the leader with an almost 30 per cent share of the Indian market.

The M&M management has clarified that its offer is based on the manufacturing facilities available at the plant. The land has never been a consideration, a company spokesperson has said. The government of Gujarat is offering a 49 per cent stake in Gujarat Tractor Corporation of Mahindra & Mahindra as part of its plan to divest holdings in some state government-owned companies.

While Mahindra & Mahindra's main concern is to make use of the Gujarat facilities to expand its product mix, it also wants to get a hold in the Gujarat market. The company is also negotiating with the central public sector company, HMT, to acquire its tractor plant at Pinjore. The due diligence process in this case is now in progress.