Mahindra & Mahindra is expanding its base in Turkey, the fourth largest tractor market in the world, by acquiring Erkunt Group's tractor manufacturing and foundry businesses for $127 million (about ₹816 crore).
M&M said it will acquire 100 per cent of the share capital of Erkunt Traktor Sanayii A.S for $76 million and at least 80 per cent of Erkunt Sanayi A.s, which is the foundry business for an estimated enterprise value of $47 million.
“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 fourth largest tractor market," said Pawan Goenka, Managing Director, Mahindra & Mahindra.
The Erkunt Foundry, in which Mahindra got 80 per cent of the share capital, operates in the casting and machining sector. It has the capability to manufacture engine blocks, cylinder heads and transmission cases.
The foundry also gets 75 per cent of its revenue from exporting to the European Union, the UK and other countries.
The foundry unit is a full service provider — from castings to machining and focuses on engine blocks, cylinder heads and transmission cases — and has a strong customer portfolio, including JCB, MAN, Ford and Deutz.
The foundry unit had a revenue of $47 million during 2016. “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 Rajesh Jejurikar, President, Farm Equipment Sector.
Double global revenue The farm equipment market in Turkey is pegged at $3.5 billion against $5 billion market in India, making it an important growth market for M&M, besides providing the company access into the European market.
The acquisition is part of M&M's plan to double its global revenue to $5 billion by 2019. It is targeting 50 per cent revenues from global markets by 2019.
This is Mahindra's fourth global acquisition in the farms and equipments space and second in Turkey after it acquired Turkish company Hisarlar in January.
Erkunt is the fourth largest tractor maker in Turkey with a market share of 6 per cent and annual revenues of $88 million in 2016. M&M said the deal also includes acquiring some of Erkunt's debt, however, the quantum of debt was not disclosed.