Mahindra & Mahindra Ltd. said Tuesday it has acquired a 75.1% stake each in two Australian aerospace companies for INR1.75 billion (US$37.4 million) to expand its aircraft and aerospace-component manufacturing business.
The company, through its wholly owned unit Mahindra Aerospace Pvt. Ltd. and jointly with Kotak Private Equity, acquired the stake in aircraft maker Gippsland Aeronautics and parts supplier Aerostaff Australia, it said.
“The 24.9% stake remaining with each company (Gippsland and Aerostaff) will be eventually converted into stocks in Mahindra Aerospace,” Arvind Mehra, senior vice president of strategy at Mahindra Systech, told reporters. He didn't say when or under what terms the stake will be converted.
Mahindra Systech is a group of Mahindra's wholly owned component-manufacturing units such as Mahindra Aerospace, Mahindra Ugine Steel Co. and Mahindra Forgings Ltd.
The acquisition will give Mahindra access to orders from Boeing Co., European Aeronautic Defence and Space Co. and other companies bidding for defense contracts in India. Under Indian law, foreign companies selected for defense contracts have to spend part of the project value to source from local vendors.
The acquisition will be funded through cash and stock options, Hemant Luthra, president of Mahindra Systech, said separately, adding, the total deal value also include a deferred cash payment. “A major part of the deferred cash will be put as investments in the company and its facilities over a period of time.”
Post the acquisition, the company will make aircraft with two to 20 seats and aims to sell 25-30 planes a year, Luthra said.
“This number (of aircraft) will increase and we aim to have 475 aircraft flying in the next five years,” Luthra said, adding, the company expects revenue of INR6.50 billion over that period. He didn't provide details on the company's current revenue.
Mehra said this acquisition will also give the company access to international markets.
“Due to the acquisition we have inherited technology, processes and international certification in various countries that the two companies already have,” said Mehra, adding, the deal will immediately give it access to markets in 34 countries.
Mahindra had invested $10 million in its aerospace facility in the south Indian city of Mallur and expects it to be up by July.
Mehra said the acquisition will give it two aerospace facilities in Australia.
Source: WSJ