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Mahindra To Sell Its Stake In SsangYong To US-Based HAAH Automotive

Mahindra To Sell Its Stake In SsangYong To US-Based HAAH Automotive

Indian auto giant Mahindra & Mahindra could soon dilute its stake in SsanYong Motor. According to a recent report, the automaker is looking to sell its stake in the loss-making South Korean subsidiary to the US-based HAAH Automotive Holdings. A report by the Korea Times states that SsangYong Motor plans to sign an investment agreement with HAAH Automotive sometime this week, at the earliest. The planned agreement would likely be a "binding offer", which means that the buyers could look to complete the acquisition process before a cash strapped company goes to court receivership in order to save itself from bankruptcy.

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Mahindra is planning to invest in SsangYong through its Korean subsidiary.

The report further states that HAAH Automotive is expected to close the deal before SsangYong heads into court receivership due to the heavy losses. Meanwhile, HAAH is expected to invest about 550 billion won in SsangYong, the minimum amount required to normalise operations for the UV maker. Under the deal, the Korean automaker will see investments coming in from China's Chery Automobile Company that partly owns HAAH Automotive.

Earlier this year, Mahindra had announced it was ready to cut its stake in SsangYong to under 50 per cent from the current 75 per cent if it gets new investors. However, it needs to be seen if HAAH will assume majority control of SsangYong. The report quotes sources that the investors want Mahindra onboard and maintain 51 per cent shareholding in the automaker.

At present, the SsangYong's short-term debt stands at about 306 billion won to lenders, which include JP Morgan, BNP Paribus, Bank of America Merrill Lynch, apart from 150 billion won owed to other foreing investors. HAAH Automotive Holdings was expected to submit its final investment proposal in the coming 7-10 days. carandbike raised a query with Mahindra about the new investment in SsangYong, but the Indian automaker has not made a comment yet.

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Mahindra was planning to reduce its stake in SsangYong.

Mahindra & Mahindra's board had rejected the proposal to infuse a fresh investment of 230 billion won in SsangYong to resurrect operations for the automaker in April this year. Instead, the board allowed an investment of only 40 billion won in the company, just enough to handle operations for three months. In a bid to keep operations afloat, SsangYong had to raise an additional $147 million by selling its service centres located in the Guro district in Seoul to an asset management company. A new investor then, is the need of the hour for the ailing firm.

While HAAH is a distributor of vehicles, it is Chery Automobiles that is said to have keen interest in acquiring a stake in SsangYong. Speculations suggest that the company is looking to sell its vehicles via HAAH and use the Korea-US free-trade agreement (FTA). Previously, China's BYD was also said to be interested in SsangYong to capitalise on the same.

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Source: KoreaTimes

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