M&M to merge Tech Mahindra and Mahindra Engineering Services

CHENNAI: The $16 billion Mahindra group has decided to merge Tech Mahindra and Mahindra Engineering Services (MES).
The board of directors of both companies approved the proposal on Friday. MES is a global engineering consultant and service provider catering to automotive, aerospace, defense & manufacturing industries. It boasts 1300+ employees and revenues of around Rs 250 crore as of FY13.
"This merger will see the creation of one of the prominent players providing engineering services from India with strengths in aerospace and automotive verticals," company said in a statement."MES will benefit due to the larger global reach and deeper resource pool of Tech Mahindra, while Tech Mahindra will gain access to some of the key automotive clients across the globe."
Said Karthikeyan Natarajan, global head – integrated engineering services, Tech Mahindra: "MES and Tech Mahindra's Integrated Engineering Services (IES) merger strengthens the existing services portfolio, enhances presence in US and Germany, provides scale and brings in new clients for further expansion."
"Our joint go-to-market strategy will help us capture newer markets and enhance our service portfolio especially in aerospace and embedded services segments while bringing value to all our stakeholders," said Prashant Kamat, CEO, Mahindra Engineering Services Limited.
The exchange ratio recommended by the valuers and approved by both the boards is 5 shares of Tech Mahindra (face value of Rs 10 each), for every 12 shares of Mahindra Engineering Services Limited (face value of Rs10 each).
Tech Mahindra will issue 0.426 crore new shares, thereby increasing its outstanding shares to 23.73 crore. The merger is subject to all regulatory authority approvals and the entire process could take approximately 8-9 months.
SR Batliboi & Co and B S R and Associates carried out the valuation and jointly recommended the share swap ratio.
ICICI Securities Limited provided a fairness opinion on the swap ratio to the board of Tech Mahindra.
SBI Capital Markets Ltd provided a fairness opinion on the swap ratio to the board of MES. Khaitan & Co acted as legal advisor for the transaction.