Ashok Leyland Ltd., the flagship company of the London-based Hinduja Group announced today that it had reached agreement with Optare plc, a leading bus manufacturer in the UK, to subscribe for a 26 percent stake as a part of long-term strategic cooperation. The investment is estimated at about USD 7.5 million. The deal is expected to further benefit Ashok Leyland in its endeavour to accelerate technology, new product development and to address new markets. Optare, founded in 1985, has a turnover of about USD 125 million. Optare has been recognised for its innovative, weight optimised 'Low Carbon' range of low-floor, mid-size buses as well as a modern range of city buses. Optare has been a pioneer of the low-floor double-decker in the UK. Their new electric bus product has already secured several orders as more countries in Europe promote cleaner, greener mobility.
Ashok Leyland, a recognised market leader in buses in India, has been advancing its bus business with purpose built bus-plants in Alwar in India and Ras Al Khaimah in the United Arab Emirates, and a new range of both city buses and inter-city coaches. It has expanded its foundations to address growing needs for modern urban mobility in India as well as several international markets. With the agreement, Ashok Leyland and Optare will embark upon leveraging the synergies they have mutually identified. Ashok Leyland will have access to Optare's technology including a modern range of mid-size and full-size city buses which will appeal to several global markets.
Optare will seek to improve its competitiveness in the UK and its export markets through access to Ashok Leyland's lower-cost supply chain, cooperation in new product development and improved management of its working capital. Ashok Leyland will nominate two nominees on the Board of Optare.
The agreement brings together two quality bus-making companies who can trace their lineage to common roots – the Leyland brand, with links to the long history of that company, when it was the largest bus maker in the world. Commenting on the move, Mr. R. Seshasayee, Managing Director, Ashok Leyland and Executive Vice Chairman, Hinduja Automotive said: “This strategic alliance is a critical part of our Global Bus programme, which is under development. In Optare, we have found a European manufacturing partner who shares our vision for state-of-art buses at affordable prices. Together, we will be able to offer future-ready products of high quality and design that are competitively priced to customers in almost all regions.”
Dr. V. Sumantran, Executive Vice-Chairman, Hinduja Automotive and Member of the Board, Ashok Leyland added: “The group has embarked on a course, investing in both the core sectors and adjacent sectors in order to broaden the range of our enterprise. With Optare, Ashok Leyland can build on synergies in the global bus business, and the two companies can simultaneously advance capabilities and market access in a more efficient manner”
“This new venture will deliver direct benefits to UK bus customers while propelling Optare on to the global stage,” said John Fickling, Optare's Non-Executive Chairman. “We will benefit from the tremendous opportunities offered by Ashok Leyland not only as an industry giant but as a leader in advanced technology” he added.
Jim Sumner, CEO, Optare, said: “For the past year, we have focused on turning around our business. However, we have made no secret of our wish to find a long term strategic partner. Now with Ashok Leyland, I am confident of creating an organisation which will become a significant force in the global industry for many years to come. While for the past 10 years we have been leaders in low-floor bus designs, today we are leading the way in low carbon designs,” he added.
The agreement between Ashok Leyland and Optare will be the subject of a General Meeting of Optare's shareholders to be held in Leeds on Monday 16th August, 2010.
Source: Equity Bulls