Kubota Corp eyes major shareholding in Escorts

New Delhi, November 18

Farm machinery major Escorts Ltd and Kubota Corporation on Thursday announced a deal under which the Japanese partner will acquire an additional 5.9% stake in the Indian firm for Rs 1,872.74 crore, paving the way for the latter to become a majority stake holder for which it could invest around Rs 10,000 crore.

Deal dynamics

• In a multi-structured deal, Kubota will increase its stake in Escorts to 14.99% after a preferential issue of 93.64 lakh equity shares
• Kubota, which currently has 9.09% stake in Escorts, will then make an open offer to the public shareholders to acquire up to 26% stake

In a multi-structured deal, Kubota will increase its stake in Escorts to 14.99% after a preferential issue of 93.64 lakh equity shares at an issue price of Rs 2,000 per share, aggregating to Rs 1,872.74 crore. It will become a joint promoter in Escorts.

Kubota, which currently has 9.09% stake in Escorts, will then make an open offer to the public shareholders to acquire up to 26% of the share capital in accordance with SEBI regulations at the same price as the preferential issue, Escorts said in a statement.

In the event of the open offer being fully subscribed, Kubota's investment for the purpose could be over Rs 8,250 crore and its stake in Escorts would increase to 44.80% after the first capital reduction.

As part of the deal, there will be selective share capital reduction of the firm by cancelling and extinguishing all the residual equity shares currently held by the Escorts Benefit and Welfare Trust, a promoter entity, without payment of any consideration to the aforesaid trust, the company said in a regulatory filing.

Kubota Corporation will become a joint promoter along with Escorts' existing promoter Nanda family, who currently hold 11.6% stake but are not selling any of their shares under the deal.

Along with the Nanda family, the Escorts Benefit and Welfare Trust — the current promoters of Escorts together hold a 36.59% stake in the company at present. Escorts said its Board has also approved changing the name of the company from 'Escorts Ltd' to 'Escorts Kubota Ltd'. — PTI