India's Tata buying Daewoo trucks
NEW DELHI, India (Reuters) -- India's top truck maker Tata Motors Ltd has agreed to buy the truck-making arm of South Korea's failed Daewoo conglomerate, a key step in its plan to cut reliance on the cyclical Indian domestic market.
The automaker, owned by the Tata group, India's second-largest business conglomerate, will buy Daewoo Commercial Vehicle Co. Ltd for about 140 billion won ($118 million), the South Korean firm said Wednesday.
Tata Motors said in a later statement it had signed a binding agreement to acquire Daewoo Commercial Vehicle Co Ltd.
"The transaction is expected to close in the next two to three months, subject to a final due diligence of Daewoo's operations, the negotiation of further agreements and the receipt of applicable regulatory approvals in India and Korea."
The statement said nothing about the possible price.
The buyout will add to Tata Motors' growing international profile, following a deal it signed last December with Britain's MG Rover Group to sell 100,000 units of its Indica car over the next five years for the European market.
Tata plans to boost the share of exports in sales to 15-20 percent in five years from five percent, to beat the effects of cyclical swings in the domestic auto market and boost growth.
Daewoo Commercial, spun off from bankrupt Daewoo Motor in November 2002, is the second-biggest maker of heavy vehicles in South Korea with a market share of 26 percent.
Its Kunsan plant can produce 20,000 vehicles a year and it recorded 12 billion won in operating profit in the first half this year, the company said.
The South Korean firm said in a statement the expected sale price did not take into account some 47 billion won in unpaid bills and reserve requirements.
Sale of the truck unit will mark the end of Daewoo Motor Co's restructuring. Its core passenger car operations were transformed into GM Daewoo Automotive Technology Co after receiving investment from U.S. giant General Motors Corp.
Analysts said Daewoo's product range will complement Tata's range of medium-size trucks and give it a technology platform for high-end vehicles that it can develop further.
"The fit is very good and will incrementally add around four to five percent to turnover and the same amount to profit," Satish Ramanathan, an analyst at ICICI Securities, said.
He added that it would also give Tata Motors access to the South Korean and Chinese markets.
Tata, also India's biggest bus maker and third-largest maker of both cars and utility vehicles, exported 3,528 vehicles in fiscal 2002-03, earning export revenue of 4.58 billion rupees.
Set up in 1945, Tata has expanded from trucks and buses to light commercial and utility vehicles. In 1999, it became India's first company to develop and launch a car by itself.
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