The board of directors of Maruti Suzuki India Limited (MSIL) today approved a proposal to merge with Suzuki Powertrain India Ltd (SPIL) with MSIL, the company said in a statement.
Shares of the company were trading at Rs 1,122 higher by 1.23% on BSE at 1.25 pm IST. And it reached Intra-day high of Rs 1,127.65.
SPIL, which supplies diesel engines and transmissions to MSI, is a subsidiary of Suzuki Motor Corporation (SMC). SMC holds a 70% stake in SPIL, while the rest is held by MSI, it added.
With the merger, MSIL will be able to bring its entire diesel engine capacity under single management control. "All key initiatives to strengthen the business, including sourcing, localisation, production planning, manufacturing flexibility and cost reduction can be controlled, monitored and improved by the MSI management," the company said.
MSIL further said the proposed merger will also benefit the combined entity through synergies in areas like finance, capital structuring, administration and consequent reduction of transaction costs.
"There are no plans to reduce jobs, following this merger," it added.
The merger is proposed effected through share swap and it also said that there will no cash outflow from MSIL.
As per the report, the swap ratio has been fixed at 1:70, which means SMC will receive one share of MSI of Rs 5 each for every 70 shares of Rs 10 each it holds in SPIL.
MSIL proposes to make a fresh issue of 13.17 million shares to SMC in lieu of SMC's 70% holding in SPIL,". Consequent to the merger, SMC's holding in MSI will go up from 54.2% to 56.2%.
"It is expected that the necessary regulatory approvals and legal requirements for the merger may be completed by end December 2012. Once the merger is approved, the books of accounts of SPIL will be merged with MSI with effect from April 1, 2012," the company said.