Suzuki Powertrain to merge with Maruti Suzuki

June 12th, 2012 - 4:28 pm ICT by IANS  

New Delhi, June 12 (IANS) Passenger car market leader Maruti Suzuki (MSIL) Tuesday said its board of directors has approved a proposal to merge Suzuki Powertrain India (SPIL) with MSIL.

SPIL is a subsidiary of Suzuki Motor Corporation, Japan. The company supplies diesel engines and transmission systems to Maruti Suzuki which also holds 30 percent stake in the firm.

“With the merger, Maruti Suzuki will be able to bring its entire diesel engine capacity under a single management control,” the company said in a statement.

“All key initiatives to strengthen the business, including sourcing, localisation, production planning, manufacturing flexibility and cost reduction can be controlled, monitored and improved by Maruti Suzuki management.”

According to the company, the merger will bring in benefits for the combined entity in the form of synergy obtained in areas such as finance, capital structure, administration and reduction in transaction cost.

“The merger is proposed to be effected through a share swap. There will be no cash outflow from Maruti Suzuki. There are no plans to reduce jobs, following this merger.”

The company said share swap ratio has been fixed at 1:70, through which Suzuki Motor would get one MSIL share of Rs.5 for every 70 shares of SPIL with a face value of Rs.10 per share.

“MSIL proposes to make a fresh issue of 13.17 million shares to SMC in lieu of SMC’s 70 percent holding in SPIL. Consequent to the merger, SMC’s holding in MSIL will go up from 54.2 percent to 56.2 percent.”

“It is expected that the necessary regulatory approvals and legal requirements for the merger may be completed by December-end. Once the merger is approved, the books of accounts of SPIL will be merged with MSIL with effect from April 1, 2012,” the statement said.

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