Samvardhana Motherson International (SMI), an automotive parts conglomerate, has signed a strategic agreement to acquire assets of frame manufacturing and assembly operations from Daimler India Commercial Vehicles (DICV).

These operations which were at its facilities in Chennai have been bought at book value. Also, as a part of the transaction SMI, has signed a long-term agreement with DICV for supply of the complete frame assembly, the company said in a statement.

Formerly Motherson Sumi Systems, SMI  runs the manufacturing operations of the frame manufacturing facility of DICV. The frame assembly operations are managed by DICV itself in a separate facility. Once the transaction is  completed, SMI will own the assets including long term leasehold rights for land and will run end to end operations for frame manufacturing and assembly and supply to DICV under the long-term supply contract. The transaction is expected to close during Q3 of the current fiscal subject to customary closing conditions and necessary regulatory approvals, the company added.

According to SMI, the development provides a vertical integration opportunity by addition  of certain key assets and machinery, and thereby significantly increases the content per vehicle. Furthermore, it will help in changing SMI's status from being a contract manufacturer to the principal manufacturer of  frame assembly business.  Post the transaction, for ten years SMI will become the sole supplier of frame assembly to DICV. Also, it will open avenues of similar business models with other OEMs in the country.