Japanese auto-component maker JTEKT Corporation is set to buy out its Indian partner Sona Group’s 25% stake in Sona Koyo Steering Systems for about Rs 550-575 crore, thereby ending their 32-year-old long association.
The deal, likely to be signed on Wednesday or in the next couple of days, will be priced at Rs 85-90 per share, valuing the joint venture company at about Rs 1,700-1800 crore, said two persons involved in the transactions.
Sunjay Kapur is the chairman of Sona Koyo and his father Surinder Kapur was the founder chairman of the company. ET had reported the possibility of a deal last week.
The Sona Koyo Steering Systems spokesperson did not respond to the email queries till the time of going to press, while JTKET Corporation could not be reached for comments.
“This proposed buyout is in line with the strategy of Japanese auto component makers, which are trying to consolidate their presence in India by buying out their local partners. These are mostly Maruti Suzuki vendors and similar deals will also take place in other auto component joint ventures,” said a person familiar with the development.
The Indian partners have agreed to sell at a marginal premium to the average of last six months price. Its share price has jumped by over 32% in the past one month. On Tuesday, its share price rose 2.9% to close at 81.80 on the Bombay Stock Exchange.
JTEKT, that owns little over 20% stake in the joint venture, will also make an open offer after entering into a binding agreement with Kapur for purchasing 25% shares from existing investors under the takeover code, said the first person quoted above.
“JTEKT’s purchase of shares from Kapur is an inter-se transfer between the two promoters; the acquirer will have to make an open offer due to the fact that there is change in the management as the Indian promoter, Kapur, is exiting from the management completely,” said the first person.
This will be the second split between long-term Indian and Japanese partners in the automotive segment after Hero and Honda parted ways in 2010. The Indian promoter owns 25.28% of the joint venture company while the Japanese company owns 20.1%. Maruti Suzuki, which is a key customer of the company, own 6.94%, and the rest is held by retail and institutional investors.
Sona Koyo Steering Systems, the flagship company of the Sona Group, is one of the largest manufacturers of steering systems for passenger cars and utility vehicle market in India. It was originally set up to provide steering systems to Maruti Suzuki but has diversified its customer base over the years. Sona Koyo's customers include major vehicle manufactures in India such as Maruti Suzuki, Toyota, Hyundai, Tata Motors, Mahindra & Mahindra, General Motors and Mahindra-Renault.
Independently, as well as through its network of overseas joint venture partners, it exports high quality precision products to the USA, Europe and Japan.