Mahindra And Mahindra Acquires Stokes Group

Mahindra and Mahindra Ltd. (India) has acquired Stokes Group Ltd. (UK). Mahindra Group, based in Mumbai, is the largest manufacturers of automobiles, tractors, components, and related equipment in that country. M&M also is involved in IT, telecom services, and financial services. Stokes Group (on the web at stokesforgings.com) is the largest automotive-related forging producer in the UK. Stokes is also a key supplier of high quality near-net forgings and related components to the bearing industry, most notably Koyo. It is credited with being highly cost-efficient, able to work with advanced materials, and deploying the industry's most advanced manufacturing technologies. Its capacity is for forgings ranging from 0.2kg through 35kg. President Ian Young will remain in that position at Stokes. M&M indicated the strength of the management team was a deciding factor in making the acquisition over several others under consideration, and that it would also prefer to keep the workforce intact. Anand Mahindra, Managing Director of the eponymous group, said: "Stokes' acquisition demonstrates our commitment to build a world-class business that serves global customers and enhances value for stakeholders." The Mahindra Systems and Automotive Technologies division will absorb Stokes Group. Hemat Luthra, head of the group, said: "The acquisition offers benefits to MSAT and Stokes stakeholders. The customers in Europe can continue to get product from a better-capitalized supplier at economic pricing. Indian customers will get access to world-class technology and the rich legacy of experience that the Stokes management team brings to the table." The acquisition comes as many Indian manufacturers are being challenged to build infrastructure to match the growing demand for their products, particularly in the automotive business. Bringing a forging supplier into the organization allows M&M to leverage its own demand with economies of scale selling to other customers, as well as better shield itself from cost fluctuations by becoming more vertically integrated. While bearing manufacturers represent some of the customers for Stokes Group wheel hubs, flanges, bearing sleeves, spindles and hub carriers, it also is a key supplier to Land Rover, Bosch, Ford, Visteon, ZF and others in the automotive industry. Its close ties to the auto industry also hurt Stokes, however, with the closing of MG Rover. Outside the auto industry, Stokes supplies forgings for rings, gears, material handling conveyors, bridges, vehicle tracks, railroad equipment, and a wide variety of other applications. A Koyo Bearings Europe executive is quoted by Stokes as saying, "...today, all of our local supply of forgings are supplied by Stokes Forgings - that business is growing and will grow further based on true partnership, reaction to our needs, understanding of our needs, applying their technology and innovation to improve our product and the product which we send to our customers." Amforge, with a similar capacity to Stokes Group, was acquired by M&M early in 2005. The company said it is now possible the forging operations -- with 70,000 tonnes joint capacity -- would be combined and then operated as a separate division, spun off from Mahindra Systems and Automotive Technologies. Mr. Luthra commented on the high cost of labor at Stokes' UK operations by noting production could be shifted to take advantage of M&M's international operations: "The high-value, high-technology products would be made in the UK. We would rationalize the product mix between our facilities in India and UK." Mahindra and Mahindra declined to comment on the value of the all-cash acquisition.