Kubota to acquire 10 percent stakes in Escorts Limited

One of Japan’s largest tractor and heavy equipment manufacturers, Kubota will acquire 10% equity stake engineering in Escorts Limited for Rs 1042 crore. Escorts Limited is among the biggest names in the Indian agri-machinery sector. 

After completing the transaction, Escorts and Kubota will be collaborating to make the Indian market a hub of product development, manufacturing, and sourcing for the rest of the countries across the world. 

The investment done by Kubota will comprise of 9. 1% of the equity stake on pre capital reduction. The investment also includes 10% equity stakes on a post capital reduction basis for a total investment of Rs 10, 419, 034, 800. The price illustrates a roundabout premium of 48.21% over the last traded price on March 19, 2020.

While Escorts will be issuing 12,257,688 equity shares through a preferential issue to Kubota which will have an issue price of Rs 850 per equity share. The transaction is subject to the approval of the shareholders' and necessary regulatory. 

Elaborating more about the acquisition, Nikhil Nanda, Chairman, and Managing Director, Escorts, said, "This collaboration aims at leveraging R&D strengths of Kubota to offer cutting-edge products for domestic and export markets, serving customers in new markets and new product lines.”

While Escorts will be issuing 12,257,688 equity shares through a preferential issue to Kubota which will have an issue price of Rs 850 per equity share. The transaction is subject to the approval of the shareholders' and necessary regulatory. 

Elaborating more about the acquisition, Nikhil Nanda, Chairman, and Managing Director, Escorts, said, "This collaboration aims at leveraging R&D strengths of Kubota to offer cutting-edge products for domestic and export markets, serving customers in new markets and new product lines.”

Nanda believes that the collaboration will offer farmers innovative solutions for domestic and export markets. “With our manufacturing expertise and strong domestic distribution combined with collaboration with Kubota, we aim to reach our objective of becoming the market leader in farm mechanization, and address the food security challenge," adds Nanda. 

"Escorts has a strong technology legacy and diversified portfolio in agriculture equipment solutions market and Kubota has proven global technology capabilities. Both companies together, with their leadership in respective geographies, will consolidate strengths and technology innovation excellence to emerge as a global leader”, adds Yuichi Kitao, President and Representative Director, Kubota, Japan.

The companies are expecting to explore new avenues for growth in construction equipment and agriculture implements so that they could get an upper hand in the global market. Kubota and Escorts, both the companies pioneer in the field of agriculture and have a reputation in the global market. It would be quite interesting to see how this acquisition turns out to be a better opportunity, not only for the companies but also for their customers across the world.