India’s Apollo Tyres to buy US’ Cooper Tire for $ 2.5 billion

Friday, 14 June 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Apollo Tyres Ltd., agreed to buy US-based Cooper Tire and Rubber Co., for about US$ 2.5 billion in a deal that would make it the world’s seventh-largest tire maker and reduce its dependence on a slowing Indian auto market.

The acquisition of Cooper, the second biggest US tire maker and No. 11 globally with annual sales of US$ 4.2 billion will give Apollo access to the US market for replacement tires for cars and light and medium trucks, Cooper’s main business.

Apollo, which currently gets two-thirds of its revenue from India, will pay US$ 35 per share, representing a premium of about 43% to Cooper’s Tuesday close.

“It is very important for us to expand our horizons. Especially in the long run, the US market is going to look up,” Apollo Chairman Onkar Kanwar said on a conference call on Wednesday.

The deal is the latest in a string of big overseas acquisitions by Indian companies in recent years, including Tata Motors US$ 2.3 billion purchase of Jaguar Land Rover and mobile operator Bharti Airtel US$ 9 billion takeover of the African operations of Kuwait’s Zain.

It is also another example of an Asian company buying a well-known US firm, coming just two weeks after China’s Shuanghui Group agreed to buy Smithfield Foods for US$ 5 billion.

“The US is an untapped market for Apollo. And the US market is obviously big, and among the developed markets, it is the only one that is growing significantly,” Mumbai-based brokerage ICICIdirect auto analyst Nishant Vass said.

Indian car sales fell 7% in the financial year that ended in March, the first annual fall in a decade, while sales in Europe, Apollo’s second-largest market, are at a 20-year low.

But auto sales are one of the bright spots for the US economy. Sales in the second biggest auto market after China rose more than expected in May as construction workers and oil drillers bought more pickup trucks, and they are expected to remain strong for the rest of the year.

Kanwar has expanded Apollo, which had revenue of US$ 2.5 billion in 2012, after taking control of the company in 2002, following a prolonged public spat with his father, who founded the company in 1976.

His previous acquisitions include South Africa-based Dunlop Tyres International Ltd in 2006 and Dutch tire-maker Vredestein Tires in 2009.