India's leading sports utility vehicle maker Mahindra and Mahindra signed a preliminary agreement Monday to take over bankrupt South Korean carmaker Ssangyong Motor, Ssangyong said.
Ssangyong announced the signing of the memorandum of understanding in a regulatory filing to the Seoul stock exchange, but no figures for the deal have been disclosed.
"We give the takeover candidate (Mahindra and Mahindra) an exclusive right for negotiation, and won't be involved in any takeover-related activities with a third party," the company said.
Ssangyong's creditors had said on August 12 they had chosen Mahindra and Mahindra as the preferred bidder to take over a controlling stake in the ailing South Korean carmaker.
The creditors have not said how much Mahindra has bid but analysts said the cost of more than 50 percent of Ssangyong would be up to 500 billion won (418 million dollars).
|India's leading sports utility vehicle maker Mahindra and Mahindra signed a preliminary agreement Monday to take over bankrupt South Korean carmaker Ssangyong Motor, Ssangyong said.|
Mahindra vice-chairman and managing director Anand Mahindra said earlier this month that the tie-up -- the largest investment by an Indian company in South Korea -- would "create a platform for global expansion" and create an "Asia-focused SUV player".
Ssangyong was granted court protection from creditors in February 2009 after rising oil prices and slowing demand due to the global recession hit SUV sales and former Chinese parent Shanghai Automotive Industry Corp declined to inject more funds.
It has since struggled to stay afloat, and a violent strike over job cuts disrupted production for almost 80 days last year.
Mahindra was chosen over Indian tyre maker Ruia Group and Young An Hat, a local headgear company that also owns bus maker Daewoo Bus Co.
Three other suitors, including an alliance between France's Renault and Nissan of Japan, had withdrawn earlier apparently because of the high costs.
Mahindra, which is seeking to go global, has been eyeing Ssangyong to gain access to new technologies for sport utility vehicles (SUVs) and expand its overseas presence.
Ssangyong, Korea's smallest carmaker, is mainly a manufacturer of low-priced but robust SUVs such as "Rexton," "Kyron" and "Actyon" that are sold globally. It also makes sedans.
If the deal goes through, Mahindra would become the second Indian carmaker to enter the South Korean market after Tata Motors, which bought truck maker Daewoo Commercial Vehicle in 2004.
Due deligence for the Ssangyong deal is expected to begin in September. A Mahindra executive said earlier this month that a definitive agreement was expected in November.