Farm equipments manufacturer Escorts on Thursday said its Japanese partner Kubota Corporation will acquire an additional 5.9 per cent stake in it for ₹1,872.74 crore, taking the total holding to 14.99 per cent and becoming a joint promoter.

Escorts in a statement said the company will issue 93.64 lakh equity shares through a preferential issue to Kubota at an issue price of ₹2,000 per equity share, aggregating ₹1,872.74 crore, subject to shareholders' and necessary regulatory approvals. Kubota had 9.09 per cent in Escorts earlier.

Open offer

“Kubota will also make an open offer to the public shareholders of Escorts to acquire up to 26 per cent of the share capital in accordance with SEBI regulations...the Board accorded its approval to change the name of the company from “Escorts Limited” to “Escorts Kubota Limited” or any other name containing the trade names “Escorts” and “Kubota” as may be approved by the Central Registration Centre (CRC), RoC and other regulatory authorities,” the statement said.

Escorts further said its board has also approved entering into or continuing to enter into related party transactions for a period of five years with Kubota or relevant subsidiaries subject to an aggregate limit of ₹4,500 crore per annum under mutually-agreed terms and conditions.

As part of the agreement, the two companies have also 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 (KAI) and Escorts Kubota India — into Escorts, subject to necessary approvals, it said.

“This will enable both companies to enhance the value they have created by leveraging each other's strengths – be it in technology, market access, manufacturing processes or engineering excellence. With this Escorts is positioned to become an institution that will serve Indian and global farmers for decades and centuries,” Nikhil Nanda, Chairman and Managing Director, Escorts, said.

Kubota Corporation will become a joint promoter along with the Escorts existing promoter Nanda family, who are not selling any shares of the company. The current promoters of the company hold a 36.59 per cent stake in Escorts.

New collaboration

“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,” Nanda added.

The statement said that Kubota also intends to have Nanda engaged in his individual capacity as a non-employee with the proposed designation of Senior Managing Executive officer and General Manager of Value-Innovative Farm and Industrial Machinery Strategy and Operations of Kubota.

Besides, there is a proposal to induct him as a Director on the Board of Kubota's European business holding company, Kubota Holdings Europe BV Netherlands.

‘Positive development’

According to analysts, the deal is a positive development for Escorts.

“With Kubota’s know how in the farm equipment, mechanisation and construction equipment space, we see this as a winning combination and shall expand the product offerings at Escorts. It shall also entail greater sourcing by Kubota from its Indian arm for its other global markets,” Shashank Kanodia, Research Analyst at ICICIdirect said.

Shares of Escorts closed at ₹1,802.90 apiece on Thursday on the BSE, up 10.60 per cent from the previous close.

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