* CIE to hold 51 pct stake in new entity Mahindra CIE
* Mahindra CIE Automotive will have annual sales of $3 bln
* Mahindra to buy 13.5 pct in CIE for $125.7 million
(Adds deal and financial details, comments from management)
By Aradhana Aravindan and Sumeet Chatterjee
MUMBAI, June 15 Spain's CIE Automotive SA
will buy a majority stake in the combined auto
component unit of India's diversified Mahindra Group for about
$116 million to get access to new markets and supply networks.
Separately, the group flagship Mahindra & Mahindra Ltd
, India's largest sports utility vehicle maker, has
agreed to acquire a 13.5 percent stake in CIE for 94.24 million
euros ($125.72 million).
As part of the complex deal announced on Saturday, Mahindra,
a $16 billion group that has interests in businesses including
automobile and information technology, will merge all its auto
components businesses into its Mahindra Forgings unit.
Mahindra Forgings will be renamed Mahindra CIE Automotive,
in which Spanish auto components maker CIE will hold 51 percent
and Mahindra will own about 20 percent. The rest will be held by
institutional and public shareholders.
Mahindra CIE will become one of the top 25 global auto
component suppliers, with annual sales of $3 billion and
operations from North America to Asia.
"(Through this deal) we do achieve consolidation of our own
entities which has been on the cards for a while ... we also
create a global entity simply by this alliance with them," Anand
Mahindra, chairman of Mahindra, told reporters.
The transaction will be "cash neutral" for Mahindra, as the
company will use the proceeds from the stake sale in its units
to buy CIE shares, making it the second-largest shareholder in
the Spanish company.
Mahindra will pay 6 euros per share for the CIE stake, a
small premium to its Friday close of 5.57 euros.
"CIE's leadership and shareholders have a strategy to
develop India as the gateway to the Asian market," Anton
Pradera, chairman of CIE Automotive, said in a statement issued
"We have been impressed by the promise of the Indian
automotive market and the growing emergence of India as a key
global production hub for small cars ... we are happy to see CIE
gaining an entry to India."
CIE will acquire majority stakes in Mahindra's listed and
unlisted auto component units from the founders and from public
shareholders through mandatory share tender offers that have
separately been announced.
As per the Indian takeover rules, any company buying a 25
percent stake in a listed Indian entity will have to launch an
offer for at least 26 percent more from the public.
The final investment by CIE, whose clients include Ford
Motor Co and PSA Peugeot Citroen, will depend on
the response to the tender offer.
The listed Mahindra units in which CIE will buy stakes are
Mahindra Forgings, Mahindra Composites and Mahindra
Mahindra, which has had a hard time building a presence
outside India, has been scouting for overseas tie-up
opportunities in recent years to realise a long-standing
ambition to be a global player.
Anand Mahindra said that the deal would be an "enabler for
the global expansion plans" of the group's automobile business.
India's Kotak Investment Banking acted as the adviser to the
Mahindra Group on the transaction.
($1 = 0.7496 euros)
($1 = 57.5550 Indian rupees)
(Editing by Susan Fenton)