BOMBAY/SEOUL - Tata Motors Ltd., India's biggest truck maker, on Wednesday announced it had signed a deal to buy the commercial vehicle unit of South Korea's Daewoo Group for $102 million, marking its first foreign acquisition.
The deal will be the latest in a series of sales of failed Korean companies since the 1997-98 Asian financial crisis.
Under the contract, Tata Motors will buy the truck maker through the purchase of new shares to be issued at the end of March, Daewoo Commercial Vehicle Co. Ltd said in a statement. The deal should close on March 29.
"It perfectly fits into Tata's existing range of products and more importantly gives it a foothold in the fast growing Chinese market," said Bombay-based Richard D'souza, an industry analyst with Four Dimensional Securities Ltd.
"I am confident that both companies will drive considerable benefits from this agreement," Ratan Tata, chairman of the Tata Group, said in a separate statement.
The Tata group runs about 80 companies, ranging from India's biggest software services exporter -- the unlisted Tata Consultancy Services -- to steel, hotels, tea, and wireless services firms.
The purchase amount does not include some liabilities and provisions against severance pay for employees but includes the perpetual and exclusive right to use Daewoo trademarks in Korea and overseas markets for the product range of the acquired division.
Daewoo Commercial Vehicle, spun off from Daewoo Motor in November 2002, is the second-largest maker of heavy commercial vehicles in South Korea and has a market share of 26 percent.
"With this deal, Daewoo Commercial is expected to have product competitiveness after strengthening research and development and after-sales services," said the court-appointed president of Daewoo, Chae Kwang-ok, in the statement.
Daewoo also produces tractors and other utility vehicles with an annual capacity of 20,000 vehicles. The firm, which has 800 employees, has been under court protection while its parent, Daewoo Motor, sold most of its passenger car operations to General Motors and partners in 2002.
Tata was selected as a preferred bidder late last year and has since completed due diligence.
Analysts estimate Tata Motors to end the fiscal year ending March with a total commercial vehicle production of about 150,000 units.