Cross-border takeover: Chrysler to up stake in Eicher to 24%
German car and commercial vehicle major DaimlerChrysler is likely to increase its stake in Eicher Motors to over 20%. DaimlerChrysler already holds a 3.56% stake in the Sidhartha Lal-controlled commercial vehicle maker.
Market sources indicate that DaimlerChrysler could be increasing its stake in Eicher Motors to 24%. As per regulations, the acquisition will be followed up by an open offer to acquire a further 20% in the company.
In August ’06, DaimlerChrysler was reported to be in talks with CV makers including Tata Motors, Eicher Motors and Ashok Leyland, in an attempt to strengthen its foothold in the country. DaimlerChrysler representatives said the talks were part of its market-evaluation exercise following the launch of its Actros range of trucks in June this year.
But the company did not rule out the possibility of joining hands with an Indian company to break into the domestic market. “At present, we are engaged only in market investigations. Talking about the nature of future alliances would be purely hypothetical at this stage,” said a company official.
DaimlerChrysler is currently engaged in a programme to spruce up its truck division. This involves identifying new growth segments and markets for its trucks across the world. India and China have been identified as two markets with big growth potential.
A source close to Eicher Motors confirmed that the company had been in talks with DaimlerChrysler for some time now. At present, the promoters own 58.6% stake in Eicher Motors, and DaimlerChrysler will most likely be buying the additional 20% stake in the company from the promoters. Shares of Eicher Motors have been active in the past week, moving up 15.7% since September 28. T
he stock ended on Thursday at Rs 355.60, up 5.64%, on the BSE. Eicher’s vehicle portfolio falls in the 5-25 tonne range, of which it is strongest in the 7-11 tonne market, where it has a 33% market share. Overall, Eicher controls 5-6% of the commercial vehicle market.
DaimlerChrysler, on the other hand, has a 15% share of the global medium-heavy duty truck market. The ‘truck group’ at DaimlerChrysler sold a total of over 529,000 units in ’05, its best ever sales performance till date.
But market watchers say the rationale behind the deal is obvious. “Eicher gets an international partner who will hold a strategic stake in the company and will bring in much-needed investments and sophisticated cutting-edge technology. DaimlerChrysler may have learned an important lesson from Volvo’s experience here — after 8 years of operations in India the Swedish company has less than 1% share of the market.”
Daimler may have to divest Tata stake
“It is imperative for these foreign players to join hands with Indian companies as it gives them access to crucial touch points in the local market,” they add.
Besides a small stake in Eicher, DaimlerChrysler holds a 6.69% stake in India’s largest CV maker, Tata Motors. The German company may have to divest this stake before it ties up with Eicher to avoid a conflict of interest.
DaimlerChrysler entered the Indian truck market with two variants, Actros 4040K and Actros 4840K both fitted with a 12-litre engine. The trucks are built on imported chassis. The 4040K model costs Rs 55 lakh, while the 4840K costs Rs 65-lakh.
DaimlerChrysler is in the uppermost segment of the Indian truck market. The company is currently targeting the mining areas of the country as potential markets and has opened service centres in Maharashtra and Andhra Pradesh.
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