India’s second-largest tyre manufacturer Apollo Tyres on Wednesday said it will acquire US-based Cooper Tire & Rubber Company in a Rs 14,500-crore all-cash deal.
At $2.5 billion, it is one of the largest overseas acquisitions by an Indian company. Apollo will vault from 16th to 7th position in the global tyre manufacturing rankings, and get deeper market access in the US, Europe and China, Neeraj Kanwar, Vice-Chairman and Managing Director, Apollo Tyres told newspersons.
Cooper Tire is ranked 11th globally, with revenues of around $4 billion. As part of the deal, Apollo Tyres will take over 14,000 employees and the operations of Cooper’s eight plants across the world, taking Apollo’s headcount to 30,000.
With extensive distribution and manufacturing infrastructure, Cooper has a strong presence in the US (three plants) and China (two plants), Onkar S. Kanwar, Chairman, Apollo Tyres, said.
Post the deal, Apollo will have 14 plants worldwide, and will more than double its capacity to 3,500 tonnes per day from 1,500 tonnes per day now, Kanwar said. The deal is expected to be concluded in the second half of this year, after regulatory approvals as well as nod from Cooper’s stockholders. Apollo is paying Cooper shareholders a 43 per cent premium over yesterday’s closing price on the New York Stock Exchange.
According to Reuters, Apollo would raise $2.5 billion in new debt to fund the deal, of which $2.1 billion would be through the issue of dollar bonds with a tenure of seven-eight years.
The company will sell seven brands now, including Apollo, Dunlop, Kaizen, Maloya, Regal and Vredestein. It said that in India the Cooper brand will be introduced for sports utility vehicles.
This is Apollo’s third major overseas acquisition after taking over Dunlop South Africa for Rs 290 crore in 2006, which it recently sold to Sumitomo Rubber Industries of Japan for Rs 340 crore. Apollo still has rights to sell Dunlop brand of tyres in 32 countries in Africa. In 2009, Apollo acquired the Netherlands based Vredestein Banden BV for an undisclosed sum.
Apollo shares closed up 2.7 per cent at Rs 91.95 on BSE ahead of the announcement. Cooper shares were up 40 per cent at $34.46, just below the offer price, in early trading on the NYSE.