Mahindra Systech, the holding firm for the 16 component businesses in the Mahindra & Mahindra Group, will commence the process of reverse merger of various companies with Mahindra Forgings, a listed entity. The value of the combined entities is estimated to be around at $400-500 million.
The company is in talks with various private equity players (of component firms) to get their consent to exchange their stakes in different entities for a stake in Systech. Meanwhile, Ernst & Young has been hired by the firm to value the businesses.
The company, hopes that by bringing all the business under one entity, Mahindra Systech will be able to cater to the needs of its client more efficiently and at a lower cost. This move is expected to deliver cost benefits because of economies of scale with a common market and sales front for all the companies' right from forgings, castings, stampings, gears and composites, among others.
Systech, since its inception in 2004 has made substantial acquisitions across Germany which includes component firms such as GSA. Jeco, Falkenroth, Schneweiss, Stokes in UK, Metalcastello in Italy and Hinoday, Amforge and SAR Transmissions in India. It has 24 manufacturing plants in Europe and India with around 12, 000 employees. It makes a range of auto components that include pistons, crankshafts, stub axles, hobs, gears, hood and plasma arc, among others.
There is also a possibility that the merged entity may enlist a strategic investor. However, this new entity will have five verticals - forgings, castings, gears, stampings and composites comprising a dozen or more entities operating under the verticals.
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