News: Ashok Leyland buys Czech truck firm Avia

(RTR 18/07/2006) Mumbai/Prague - India's second-largest truck and bus maker, Ashok Leyland Ltd., on Wednesday said it had bought loss-making Czech truck maker Avia, as the Indian firm gears up for more competition at home.

Financial terms of the deal, which is expected to be completed by the end of August, were not immediately available.

Avia's plant has an annual capacity of 20,000 units and makes trucks primarily in the 6-9 tonne range. It also recently launched trucks in the 10-12 tonne range.

The acquisition gives Leyland access to growing markets, a base for assembling its vehicles and the potential to save on component costs, the Indian firm said.

"It is a significant step in securing a beachhead in the European Union and the eastern European markets," said R. Seshasayee, Ashok Leyland's managing director.

Shares in Leyland, which rose on the news, ended down 1.4 percent at 30.75 rupees in a weaker Mumbai market.

Leyland, the Indian flagship of the Hinduja group, said it would look at scaling up production at Avia's plant and tap new markets including the Middle East, south east Asia and Russia.

Truck sales in India are rising on improving highways and demand to move freight as India builds more bridges and ports.

Ashok Leyland, which has 27 percent of the Indian market for medium and heavy trucks, lags leader Tata Motors Ltd.

But competition is growing: Mahindra & Mahindra will make medium and heavy trucks from 2007 in a joint venture with a unit of Navistar Inc., while Force Motors Ltd. will make heavy trucks with Germany's MAN AG.

Avia in June slashed its basic capital to 0.9 billion crowns ($39.66 million) from a previous 5.1 billion crowns to pay off part of its cumulative losses from past years.

Investment company Odien Capital Partners L.P. controlled 98.4 percent in Avia and had attempted to turn around the ailing truck maker.

Odien's restructuring efforts helped cut the firm's losses to 705 million crowns ($31.07 million) last year from 858 million crowns a year ago.