Posted On - 20 Mar 2020
Japanese tractor manufacturer, KUBOTA Corporation will acquire a 10% equity stake worth Rs 1041 crore in Escorts Ltd on a post capital reduction basis, the company informed in a regulatory filing to Bombay Stock Exchange.
Upon completion of this transaction, Escorts and Kubota will partner to become a leading player in the Indian market and a hub of product development, manufacturing and sourcing for global markets.
Escorts will issue and allot 12,257,688 equity shares through a preferential issue to Kubota at an issue price of INR 850 per equity share, subject to shareholders' and necessary regulatory approvals. Kubota's investment will constitute 9.1% of the equity stake on a pre capital reduction or 10% on a post capital reduction basis for a total investment of Rs 1041.9 cr
This price represents a premium of approx. 48.21% over the last traded price on March 19, 2020.
The Board of Directors of Escorts has given in-principle approval to consider a reduction of 12,257,688 equity shares of Escorts held by the Escorts Benefit and Welfare Trust, subject to receipt of necessary approvals and upon completion of the preferential allotment to Kubota. This shall ensure that the total equity share capital of Escorts remains unchanged.
Simultaneously with the Preferential Issue, Escorts will acquire a 40% stake in Kubota Agriculture Machinery. India Pvt. Ltd ("KAI"), the marketing and sales company of Kubota in India.
The existing 60:40 Joint Venture between Kubota and Escorts, namely Escorts Kubota India Private Limited, will continue to operate.
According to the company, this will be a win-win collaboration and benefit. Escorts from product innovation through indigenization of global R&D, production systems excellence, global supply chain, sales and distribution and act as a global sourcing hub for Kubota.
Nikhil Nanda, Chairman and Managing Director, Escorts Ltd., said, "We are pleased to partner with Kubota to offer farmers with innovative solutions and thereby maximize productivity for profitable growth in domestic and export geographies. This collaboration aims at leveraging R&D strengths of Kubota to offer cutting-edge products for domestic and export markets, serving customers in new markets and new product lines.”
“With our manufacturing expertise and strong domestic distribution combined with collaboration with Kubota, we aim to reach our objective of becoming the market leader in farm mechanization, and address the food security challenge." Nanda added
Similarly, Kubota assured supply of cost-effective products in and for India, joint product development for emerging and global markets, and expansion of product range through respective distribution networks.
Yuichi Kitao, President and Representative Director, Kubota, Japan, said, "Through this collaboration, we believe that we will cater to India and other growing economies which require high-end technology and new age tractors to address growing demands of highly mechanized farming. Kubota and Escorts, together, with their leadership in respective geographies will consolidate strengths and technology innovation excellence to emerge as a global leader."
The company will focus on new avenues of growth in construction equipment and agriculture implements, leveraging the strengths of both parties, with a focus on products including earthmoving equipment & smart agriculture implements.
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