M&M to buy Peugeot Motorcycle for ` 217 cr 

MOTOWN MOVES Deal to buy 51% stake likely to close in 3 mths; Mahindra may launch Peugeot as premium offering in India

 MUMBAI: Mahindra Two Wheelers has made a binding offer to buy 51% stake in Peugeot Motocycles (PMTC), the world’s oldest maker of motorised two-wheelers from French auto major PSA Group, for ¤ 28 million (about ` 217 crore).

Of the total investment, about ¤ 15 million (`116 crore) will be infused in the company (PMTC) to support future products, said Pawan Goenka, executive director, Mahindra & Mahindra. The company hopes to close the deal in three months.
Post the deal, M&M will have three members on board, while Peugeot will have two. M&M will retain the current management at PMTC including its CEO and will not undertake any restructuring for the next two years.
PMTC currently has 500 employees in France and 300 in China through a joint venture company.
While the current priority is to drive Peugeot to newer markets such as South East Asia, Africa and Latin America, Mahindra will also look at launching Peugeot scooters in India as a premium offering in the future.
“We will have a two brand strategy. We will position Peugeot as a premium brand in the market and Mahindra as a mass-market brand. There are clear opportunities for synergies between Mahindra Two Wheelers and Peugeot Scooters. We want to focus on building the brand, global expansion and investing in new products and synergies,” Goenka said.

PMTC has 13 models of scooters and mopeds in the 50cc-400cc range including the three-wheeler scooter Metropolis, introduced last year. However, it has seen its sales slip over the last few years, primarily due to the slowdown in the European market, which accounts for over 70% of the company’s sales.
In 2013, it volumes stood at 79,000 units, down from 115,000 units four years ago. It reported revenue of ¤ 99 million last year, compared with ¤ 142 million four years ago. The company has been looking to offload the scooter business as part of a restructuring exercise.
“Faced with a European market down sharply for several years, this partnership with M&M would allow Peugeot Scooters to diversify and accelerate its international development by combining its strengths with those of M&M,” the French firm said in a statement.
Mahindra entered the twowheeler market six years ago with the acquisition of Pune-based Kinetic Motor. It has been looking to scale up with the launch of the Centuro motorcycle last year and the Gusto scooter last week. Besides, it also sells the Rodeo and Duro scooters.
PMTC has a strong technology centre in France and a family of seven engines ranging from 50 cc to 400 cc and Mahindra is likely to gain significantly on the technology front. It will also be able to ride on Peugeot’s distribution to sell its vehicles
Mahindra Two Wheelers and Peugeot Motocycles will operate as two separate entities, but Goenka has said there could be some platform sharing and research and development collaborations in the future.
The deal is subject to Works Council consultation, as part of the employee dialogue process in France and anti-trust
NAME- RAJ GAURAV
 PGDM 3SEM

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