Japanese firm Kubota, a global leader in agriculture and water-related industries, announced that it will acquire majority stake in Indian tractor manufacturer Escorts Limited by additionally investing Rs. 9400 crores (140 billion yen /$1.2 billion).
Kubota said that it will increase its shareholding in Escorts by means of subscription to third-party preferential primary share allotment and open offer bid.
Kubota has an existing partnership with Escorts through a joint venture manufacturing company that was established in 2019. Kubota subsequently infused direct equity investment into Escorts in 2020 and acquired a 9% stake in Escorts at an estimated Rs 1040 crore (16 billion yen/140 million USD).
Kubota Corporation will increase its stake to 53.5% from the current holding of 9% through a complex three-tier transaction. It will first make an an additional investment of ₹ 1,872.74 crore in Escorts through a preferential Issue of 93,63,726 equity shares to acquire additional 6.49%. It will then make a Mandatory Open Offer (MTO) to the public shareholders of Escorts to acquire upto 26% of the share capital at Rs 7500 crore. The entire process of preferential allotment and open offer is expected to complete by March 2022.After completing the transaction, Kubota Agricultural Machinery India and Escorts Kubota India are to be merged with Escorts.
The current promoter Nanda family holdings continue to remain unchanged after the transaction at 11.6%. Nikhil Nanda shall continue be the Chairman and Managing Director of the new entity
Escorts was founded in 1944. The company earned an revenue of around $870 million (Rs 65000 crores) in the fiscal year ended March 2019. The company employed 11,000 people as of December 2019.
Escorts is reportedly the world’s largest tractor market in terms of unit sales. It also manufactures and distributes construction machinery as well as other products.
Kubota said that it is increasing its shareholdings in Escorts as it expects the basic tractor market to expand in emerging countries including India. Kubota will also utilising the combined resources in an effective manner and further strengthen the partnership between the two companies.
Kubota also added that it will continue providing quality and affordable basic tractors, by utilizing Escorts ’s knowhow and Kubota’s accumulated product development knowledge and capabilities to improve quality and productivity in the R&D, procurement and manufacturing functions.
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