Mahindra & Mahindra (M&M) informed that it’s board has approved acquiring a significant stake in SML Isuzu.
- M&M is acquiring 59% from the promoter group
- entire 43.96% of Sumitomo Corporation; and
- entire 15% of Isuzu Motors
- Quite surprising the above 59% stake is being acquired @ Rs 650/ share totalling Rs 555 cr. This price is a steep 63% discount to the previous day’s closing price of Rs 1,767/ share.
- In compliance with the regulations, an open offer for further 26% stake has been made. Offer is however at a much high price of Rs 1,554.60/ share.
- SML Isuzu will continue to remain a separately listed entity.
It’s intriguing why Sumitomo and Isuzu have agreed to sell at such a huge discount. They have effectively valued the business at only Rs 941 cr. The business reported revenues of Rs 2,307 cr and profits of Rs 121 cr during the trailing twelve months. On any valuation parameter, it looks like a very cheap sell.
Yes the Company was struggling to find it’s feet in a highly competitive Indian market, but then such cheap valuations are still unusual !
To M&M, it definitely seems like a good catch.
52 week VWAP price comes to~ 1800 which is more than offer price
I think the offer would be revised