Japan’s Kubota Corporation will expand its equity stake in India’s tractor maker Escorts to 14.99 percent via a preferential issue amounting to Rs 1,872 crore, a move that will strengthen its space in India, world’s largest tractor market. The joint entity aims to develop global leadership in the farm equipment sector.
“As part of this, Kubota Corporation shall increase its equity stake in Escorts by subscribing to new equity shares proposed to be issued by Escorts and shall become a joint promoter along with existing promoters of Escorts,” the company said in a statement.
Also, as per the communique, the name of the newly formed company will be ‘Escorts Kubota Limited’. Kubota, which has interests in tractors, earthmovers and engines, will also make an open offer to the shareholders of Escorts to acquire up to 26 percent of the company’s share capital. The open offer will be made at the same price as the preferential issuance, Rs 2,000 per share. Kubota’s stake in Escorts will increase to 44.80 percent after the open offer.
Kubota has decided to make an open offer to Escorts shareholders to purchase up to 26 percent of the company’s stock. The open offer would be priced at Rs 2,000 per share, the same as the preferential offering. After the open offer, Kubota’s stake in Escorts will increase to 44.80%.
“With a goal of making Escorts the exclusive vehicle of business in India and simplifying the corporate structure, Escorts and Kubota have decided to take necessary steps to evaluate and consider the feasibility of merger of Kubota’s subsidiaries in India where Escorts is also a partner (Kubota Agricultural Machinery India and Escorts Kubota India) into Escorts, subject to necessary approvals,” the statement said.
The deal will enable Escort to house a ‘major R&D and Innovation Centre’ despite it being the largest vehicle manufacturer and seller of certain products in India and sourcing from India.
The Board of Directors of Escorts has given assent to evaluate and consider the feasibility of cancellation of all the residual equity stake of Escorts held by the Escorts Benefit and Welfare Trust without paying any consideration. The merger of the two entities is subject to necessary approvals.
Kubota wants Mr Nikhil Nanda to act as a non-employee in the company and proposed hi the role of senior managing executive officer and General Manager of Value-Innovative Farm and Industrial Machinery Strategy and Operations of Kubota, besides a proposal to induct him as a director on the Board of Kubota’s European business holding company, Kubota Holdings Europe B.V., Netherlands.
Mr Nikhil Nanda’s non-employee involvement will not affect his role as the CMD of Escorts. He will not be getting paid for these services.
Explaining the strategic intent, Nikhil Nanda, CMD, Escorts Limited, said ” With this Escorts is positioned to become an institution that will serve Indian and global farmers for decades and centuries. While Escorts is known for its stronger India presence with proven strengths in frugal engineering and manufacturing, Kubota brings world-class processes and global reach and expertise. The construct of the new collaboration shall be based on excellence and innovation to cater to the needs of customers globally, addressing food security and environmental challenges by providing smart agriculture and infrastructure solutions. The transaction will catapult Escorts to a different level of expertise, size and growth “.