Tata Motors Ltd on Wednesday signed an investment agreement for acquisition of Daewoo Commercial Vehicle Company Ltd, the second largest truck maker in Korea, for approximately $102 million (Rs 465 crore).
The acquisition will be financed equally through Tata Motors' equity in DWCV and direct lending facilities to DWCV, a press release issued here by Tata Motors said.
The price includes the perpetual and exclusive right to use Daewoo trademarks in Korea and overseas markets for the product range of DWCV, it said.
The agreement follows the completion of due diligence by Tata Motors as per the binding memorandum of understanding signed between the two companies on November five 2003 and the culmination of a successful special collective bargaining agreement between the management and the union of DWCV, recognising the change in ownership of the company.
"This is indeed a major step for Tata Motors and a milestone for the group in its quest for globalisation. I am confident that both companies will derive considerable benefits from this agreement," Tata group Chairman Ratan Tata was quoted as saying.
The investment agreement was signed in Korea by Ravi Kant, executive director (commercial vehicle business unit), and Praveen P Kadle, executive director (finance and corporate affairs), on behalf of Tata Motors, and by Kwang Ok Chae, court receiver of DWCV, on behalf of DWCV.
DWCV has a modern plant in Kunsan that has an annual production capacity of 20,000 medium and heavy vehicles.
Both Tata Motors and DWCV believe that they can extract significant synergies in several areas such as marketing, research and product development and other operational areas.
"The complementary product range of the two companies and strengths in product development and international marketing will open new opportunities for both companies. We are excited at the possibilities of this cooperation and will now work towards a successful integration with the commitment of the management and the dedicated workforce of DWCV," Kant was quoted as saying.
The acquisition of DWCV is subject to the approval of an amended 'reorganisation plan' for the company that reflects the terms of the investment agreement by the creditors and shareholders of DWCV and the Incheon District Court, and is expected to be completed by March 2004.
DWCV's robust manufacturing and quality processes that deliver a contemporary product range has enabled the company to enjoy a market share in excess of 25 per cent in the Korean heavy truck segment and to operate profitably since its incorporation.
Tata Motors was advised in this transaction by DSP Merrill Lynch Ltd, while DWCV was advised by Samjong KPMG FAS Inc., Korea.