Anand Mahindra with CIE Automotive chairman Anton Pradera in Mumbai on Saturday. (PTI)

Mumbai, June 15: The Mahindra group today formed an alliance with CIE Automotive S.A of Spain to create a Rs 15,000-crore automotive components powerhouse that will rank among the top 25 in the world.

In a complex deal, the 1.64-billion-euro CIE Automotive will acquire through one of its subsidiaries a stake in the listed and unlisted companies belonging to Mahindra’s automotive component business.

The overseas company will then contribute its forging businesses in Spain and Lithuania to this business following which all the companies will be consolidated under a single entity called Mahindra CIE Automotive Ltd. Mahindra CIE will be listed on both the BSE and the NSE.

Subsequently, Mahindra & Mahindra (M&M) will acquire a stake of 13.5 per cent in CIE Automotive, the parent company which is listed in Spain. It will also have two nominees on the Spanish giant’s board.

In India, the share sale by Mahindra in three of its listed auto component entities will trigger an open offer. Depending on the success of the open offer, CIE Automotive will hold between 46 per cent and 53 per cent in Mahindra CIE, thus making it the largest shareholder.

While M&M is expected to have a stake of a little over 20 per cent, the public is likely to hold around 29 per cent.

M&M told the stock exchanges that it would pay 96.24 million euros (nearly Rs 740 crore) for the 13.5 per cent stake in CIE Automotive.

The three listed companies in which M&M will sell stakes include Mahindra Forgings, Mahindra Ugine Steel Company Ltd and Mahindra Composites. M&M said it would sell these stakes (ranging from 30 to 65 per cent) to Participaciones Internacionales Autometal Dos, SL, CIE Automotive SA and Autometal, SA for around Rs 674 crore.

Anand Mahindra, chairman of the Mahindra group, told reporters today that the alliance was born out of the group’s plan to build a global supply chain network that would not have occurred without attaining economies of scale.

Mahindra added that the alliance with CIE Automotive was the “best way” to attain critical mass in this business. It will also enhance shareholder value.

The alliance will have a presence in all key markets and around 40 per cent of its revenues will come from BRIC nations (Brazil, Russia, India and China). It will give CIE a presence in India and enable the Mahindra group to access the Americas and China.

The entire process is likely to be completed in 14 months. Approvals will have to be secured from the competition commissions in India and Germany, the high court, shareholders and lenders.