Mahindras to buy 51% in Peugeot Motocycles

Mumbai: Mahindra Two-Wheelers, a fringe player in the domestic market, Tuesday signed a pact to acquire 51 percent stake for euro 28 million (about 217 crore) in Peugeot Motocycles, part of the euro 54 billion French auto major PSA Group.

"Under the binding offer, Mahindra Two-Wheelers would infuse 15 million euros into Peugeot Motocycles to finance projects implemented through strategic partnership, and further sale of shares by PSA, which would allow us to take 51 percent stake in Peugeot Motocycles," M&M executive director Pawan Goenka told reporters here.

Mahindras will also invest another euro 13 million at a later stage. The transaction is subject to the Works Council consultations as part of the employee dialogue process and anti-trust law, he said, but added that "we hope to close the deal in three months".

Peugeot is well known for its four and two-wheelers in Europe and is the world's oldest two-wheeler maker. However, its two-wheeler business has been undergoing a trunaround.

In a statement, Peugeot Scooters Managing Director Fr?d?ric Fabre said: "The strategic partnership with the Mahindra & Mahindra Group will give us the opportunity to accelerate our geographic expansion. These are all opportunities to secure the future of Peugeot Scooters and give a future industrial site Mandeure."

Mahindras will continue with the current management.

Replying to a query on full control, Goenka said: "Our focus is continuity on majority stake and we are not thinking going beyond 51 percent now."

The loss-making Peugeot Motocycles employs 500 people and produces about 25 percent of the firm's scooters, mainly high-end models in French unit. Its Chinese plant employs 300 people and produces 65 percent of Peugeot Scooters' volume. The remainder is produced in Taiwan.

Mahindra will not do any restructuring in PMTC for two years post the deal, Mahindra Two-Wheelers chief executive Rajesh Jejurikar said.

Mahindra would offer access to the India market, mass market product technology and competence in marketing while Peugeot brings premium range, a strong European footprint, and a globally recognised brand.

Mahindras would support the French company's global growth plan and the brand building effort that enriches the "Frenchness" of the Peugeot brand. PSA would support the Brand and growth strategy by holding a minority share for a long term, Jejurikar said. 

The deal will enable both the partners to speed up their international expansion by driving synergies and leveraging respective strengths of both parties, Goenka said.

The SUV and utility major Mahindras entered the two- wheeler space in July 2008 by acquiring the Pune-based Kinetic Motors of the Firodias for Rs 110 crore for an 80 percent stake.

It has not been able to make a mark so far in the segment dominated by the Munjal's Hero MotorCorp, the Japanese Honda and Baja Auto, managing to sell just 20,000-odd units a month in the multi-million unit domestic market.

PMTC - also known as Peugeot Scooters - is a key player in urban mobility in Europe for 116 years, and is the oldest motorised two-wheeler manufacturer in the world.

As part of recovery plan, it is looking at outsourcing certain manufacturing operations and logistics for which it has no critical mass given the decline in its markets.

It offers one of the most comprehensive range of scooters and mopeds, from 50cc to 400cc, including successful 3-wheeled scooter, Metropolis, in the European market.

The French firm said: "Faced with a European market down sharply for several years, this partnership with M&M would allow Peugeot Scooters diversify and accelerate its international development by combining its strengths with those of M&M."

Goenka said the coming together of Mahindra and Peugeot is a win-win for the two-wheeler businesses of both companies. Mahindra would offer access to the Indian market, mass market product technology and competence in marketing while Peugeot brings premium range, a strong European footprint, and a globally recognised brand".

Over the past few years, Mahindra has strengthened its position in the two-wheeler segment globally. Mahindra Racing competes at the highest level of global motorcycle racing in the Moto3 category of MotoGP, while Mahindra GenZe recently revealed its electric two-wheelers in the US market that offer sustainable urban transport solutions to a new generation of US consumers.

The company had last week launched Gusto scooter, targeted primarily at women. Its also has sales and distribution operations in Latin America, Africa and South Asia. It has assembly operations in many of these markets.

The homegrown auto major has been active in global acquisitions in order to strengthen its position. In March 2011, M&M had completed acquisition of majority stake in South Korea's SsangYong Motor Company for USD 463 million for a 70 percent stake in the then troubling Korean auto company.