Stocks of SML Isuzu Ltd, a truck maker, plunged to the 10% lower circuit at the opening bell on April 28 following Mahindra & Mahindra Ltd (M&M) plans to buy a substantial stake in the firm.
M&M has agreed to take a 58.96% stake in SML Isuzu for Rs 650 a share, which is a total investment of Rs 555 crore, with a view to enhancing its truck and bus business. As per the agreement, M&M will acquire the 43.96% stake of SML’s promoter, Sumitomo Corporation, and another 15% stake held by Isuzu Motors Ltd, a public shareholder.
Subsequently, M&M will also make a mandatory open offer to buy up to 26% more from SML’s retail shareholders in accordance with SEBI guidelines.
Until 10:10 am, SML Isuzu shares had fallen by 10% to Rs 1,596.1, whereas M&M stock gained 1.3% to Rs 2,900.
The takeover will double M&M’s market share in India’s truck and bus segment from 3% to 6%, with plans to achieve 12% by FY31, the company said. M&M pointed out that this acquisition further consolidates its leadership in the >3.5T commercial vehicle segment, where it already has only a 3% market share, against a 52% market share in the <3.5T light commercial vehicle segment.
Earlier last month, Ashok Leyland had dismissed rumors that it was negotiating to buy a controlling interest in SML Isuzu as “factually incorrect.”
