Mahindra to buy 51% stake in Peugeot scooter unit

[NEW DELHI] Leading Indian vehicle manufacturer Mahindra announced Tuesday plans to buy a majority stake in France's struggling Peugeot Motorcycles, the world's oldest motorbike-maker, as it seeks new technology to drive sales.

Mahindra Two Wheelers, an unlisted arm of Mahindra & Mahindra, said its "binding offer" for the 51-per cent stake would involve a 15-million-euro (S$28.14-million) injection into Peugeot Motorcycles, a subsidiary of Paris-based PSA Group, which has been seeking to engineer a turnaround.

In a statement, Mahindra, part of the $16.5-billion Mahindra Group, gave no details of the purchase price but called the deal, subject to French labour legislation, a "win-win" for both companies.

"The coming together of Mahindra and Peugeot is a win-win for the two-wheeler business for both companies," said Mahindra & Mahindra executive director Pawan Goenka.

He offered assurances Peugeot Motorcycles would retain its French identity under the Indian firm's takeover.

Mahindra & Mahindra, India's biggest sports utility vehicle and tractor-maker, is the flagship of the Mahindra Group led by industrialist Anand Mahindra, a member of one of India's richest business families and known as a hands-on boss.

The merger will give Peugeot Motorcycles access to the world's largest two-wheeler market.

It could also help Mahindra, still a small player in the Indian two-wheeler segment, gain sales traction at home against local rivals Hero MotoCorp and Honda, and in Europe.

Two-wheeler sales outstrip car sales in India by a massive margin.

"Mahindra would offer access to the India market, mass-market product technology and competence in marketing while Peugeot brings premium range, a strong European footprint and a globally recognised brand," Mr Goenka said.

The announcement caps lengthy talks and comes after PSA Peugeot Citroen, Europe's second-largest automaker, moved back to profit in July after three years of losses.

PSA chief executive officer Carlos Tavares has been crafting a recovery strategy since taking the reins in March and is seeking to reduce drags on earnings.

While management has given no earnings figures for its scooter business, union officials have said 2013 losses totalled 18 million euros.

"Peugeot, which has larger-size engines, can offer Mahindra (European) technology it doesn't have," Deepesh Rathore, director of Delhi-based Emerging Markets Automotive Advisors, told AFP.

"Mahindra can supply lots of 'value engineering' and low-cost manufacturing - it should be able to make Peugeot stronger financially," he said.

Peugeot, battling competition from European scooter giant Piaggio of Italy, sold 79,000 scooters in 2013, up 8.2 per cent from a year earlier.

PSA in a separate statement said the European scooter market had been "falling sharply for a number of years" and the deal would allow its unit to "accelerate its international development". - AFP