M&M announces share swap deal to merge Mahindra First Choice with TVS Automobile

Mahindra & Mahindra Ltd (M&M) on Thursday announced a share swap deal with TVS Automobile Solutions Pvt Ltd to merge its multi-brand car and two-wheeler service venture -- Mahindra First Choice Services Ltd -- with TASL.

Under the transaction, M&M will acquire 2.76 per cent stake in the TVS group firm TASL, which is into multi-brand automotive aftermarket and related services, for about ₹35 crore.

On the other hand, TASL will acquire the entire stake of Mahindra Holdings Ltd, a wholly-owned subsidiary of M&M, in Mahindra First Choice Services Ltd (MFCS) and its subsidiary Auto Digitech Pvt Ltd (ADPL).

"As a part of the transaction, the company will secure a minority stake in TASL and in turn, MFCS and ADPL will become subsidiaries of TASL," it added.

The company will invest approx ₹35 crore for acquisition of shares in TASL, which is comparable to the consideration that TASL will pay to acquire shares of MFCS and ADPL, it said in a regulatory filing.

M&M said it has signed a share subscription agreement for subscribing Series IV Compulsorily Convertible Preference Shares (Series IV CCPS), resulting in acquiring 2.76 per cent of the share capital of TASL on a fully diluted basis.

The Series IV CCPS will be subscribed at ₹1,053.28 per share aggregating to ₹34.99 crore, the company said, adding it would also subscribe Series V Compulsorily Convertible Preference Shares (Series V CCPS) at ₹1,053.28 per share totalling ₹0.01 crore.

The subscription of Series V CCPS will have an earn-out right to increase the stake of the company in TASL. The number of equity shares upon conversion would depend upon the milestones to be achieved up to March 31, 2024, M&M said.

TASL is primarily engaged in the business of distribution of automobile spare parts, and multi-brand vehicle service. TASL is active in Europe, the US, South Africa, China and Turkey through its subsidiaries.

M&M said it expects the transaction to be completed by February 28, 2021.

Mahindra Group President, Mobility Services Sector V S Parthasarathy said, "I believe that consolidation, scale and phygital solutions will drive the next phase of growth for the company (MFCS) as well as the industry. I am confident that a strong partner like TVS ASPL will help take our legacy further and propel the company to the next orbit".

TVS Automobile Solutions Pvt Ltd Director R Dinesh said India's USD 10 billion aftermarket segment is fragmented and needs strong support for relevance and growth amid changing technology landscape in the automotive sector.

"We would take this opportunity to bring thousands of entrepreneurs into a digital platform wherein they can get benefited from digital technologies across marketing, diagnostics, customer experience, quality parts, access to training and digital payments. I am sure this partnership will be a win-win proposition for all the stakeholders," he added.

MFCS has a pan-India network of over 475 franchise partners and more than 100 distributors present in over 350 towns across 25 states and 2 union territories. TASL on the other hand has established a strong leadership by empowering over 2 million customers, 20,000 retailers, 10,000 garages along with fleet management for over 70,000 vehicles, the filing said.