Maruti Suzuki to issue equity shares to Suzuki Motor Corp to acquire Gujarat subsidiary
If the shares are allotted at the current market price, this may potentially increase Suzuki Motor's stake in Maruti Suzuki from 56.4% to almost 58% once the preferential allotment is concluded.
The Maruti Suzuki Board has approved issuance of equity shares of the company on a preferential allotment basis to Suzuki Motor Corporation (SMC), as consideration for the acquisition of 100% stake of SMC in Suzuki Motor Gujarat Private Limited (SMG), announced on July 31.
If the shares are allotted at a current market price, this may potentially increase Suzuki Motor's stake in Maruti Suzuki from 56.4% to almost 58% once the preferential allotment is concluded. The actual price will be arrived at the valuation in the forthcoming Board meeting.
This will be subject to applicable regulatory and statutory approval(s), as may be required, including requisite approval of shareholders. After such an acquisition, SMG will become a wholly owned subsidiary of the Company, Maruti Suzuki said in a statement to Bombay Stock Exchange.
"The total number of securities proposed to be issued to SMC as consideration for the acquisition of 100% stake of SMC in SMG, shall be decided in a subsequent Board Meeting, basis relevant valuation reports subject to and in compliance with the applicable regulatory and statutory framework," added the statement.
The details in relation to the subscription, including the issue price for the securities and the post allotment holding of the investors, are to be decided in a subsequent Board meeting, based on relevant valuation reports subject to and in compliance with the applicable regulatory and statutory framework, said the company.
The Board, in its meeting held on 31st July, 2023 had approved termination of the contract manufacturing agreement (CMA) with Suzuki Motor Gujarat (SMG) and acquiring the shares of SMG from Suzuki Motor Corporation (SMC) at a price to be determined in accordance with the CMA and all applicable laws and regulations. The Board decision was subject to all legal and regulatory compliances including minority shareholders’ approval.
On Tuesday, Maruti Suzuki Board evaluated the following two available options for acquiring the SMC equity in SMG: (i) payment in cash and (ii) issue of MSIL equity shares on a preferential allotment basis. The impact of both option* on the profitability of MSIL, the earnings per share and the dividend payment to shareholders was considered for each year up to 2031.
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