Mahindra & Mahindra (M&M) today said it has signed pacts with Turkey-based Erkunt group to acquire its tractor manufacturing and foundry businesses for about Rs 735 crore, which will help it enhance its product portfolio.
M&M said it will acquire Erkunt Traktor Sanayii, for Rs 478 crore, a move which is aimed at entering the fourth largest tractor market in the world. Besides, it has inked a share purchase agreement to acquire 80 per cent stake in Erkunt Sanayi AS for Rs 257 crore. The entity is engaged in production of engine blocks, cylinder heads and transmission cases. The transaction is expected to be closed by November 30, 2017.
The Erkunt deal, which comes on the back of the Hisarlar acquisition earlier in the year, is expected to help Mahindra's farm equipment business in the strategic market of Turkey.
"Turkey is a very important market in our globalisation journey and we wish to participate in its entire agri mechanisation landscape. The acquisition of Erkunt will enable Mahindra to expand its footprint in the world's 4th largest tractor market," Mahindra & Mahindra Ltd's Managing Director Pawan Goenka said.
Mahindra's strategy for its farm equipment business is to globalise aggressively and also expand its portfolio to include various new categories of tractors and farm machinery, he said.
"We will look at farm equipment as a whole for growth. We will continue to grow market share, (and) we will grow with market," he said.
This acquisition is expected to increase Erkunt's market share to 8-9 per cent from six per cent at present, Goenka added.
Goenka said the company has decided on markets for both organic and inorganic growth.
"We are focusing on small to medium acquisitions which will improve local presence and branding," he said.
M&M said it will acquire 100 per cent share capital of Erkunt Traktor thus giving it access to Turkish market.
"Erkunt is a strong local Turkish brand that has grown very rapidly over the last decade, by expanding its product range. We look forward to collaborate with the Erkunt leadership team to bring synergy and expand our footprint in Turkey," said Mahindra & Mahindra Ltd's President for Farm Equipment Sector Rajesh Jejurikar.
Established in 2003, Erkunt Traktor manufactures and markets tractors under Erkunt brand in Turkey. It also exports tractors to various global markets under the ArmaTrac brand. Last year, the company sold a total of 4,700 tractors while posting revenues of 314 million Turkish Lira. The company rolls out 23 tractor models ranging between 50 HP to 110 HP.
M&M said the investment may go up to Rs 322 crore for acquiring 100 per cent stake in Erkunt Sanayi AS (Erkunt Foundry). The entity has a production capacity of 65,000 tons in casting and 32,600 tons in machining. It operates through three different entities around Ankara.