Largest outbound deal involving an Indian auto firm to see birth of world’s 7th-largest tyre maker

In what is expected to be the largest outbound deal in the Indian automobile industry, Apollo Tyres today said it would acquire US-based Cooper Tire & Rubber Company, maker of car and light truck tyres, in an all-cash transaction of around Rs 14,500 crore ($2.5 billion).

A wholly-owned subsidiary of Apollo Mauritius Holdings will pay Cooper stockholders $35 a share in cash — a 40 per cent premium over the stock’s 30-day volume-weighted average price.

The shares of Apollo Tyres today closed at Rs 92 apiece, up 3.02 per cent from their previous close, on BSE.

The two companies, the combined sales of which stood at $6.6 billion in 2012, would together form the seventh-largest tyre company in the world after the acquisition is completed. This is Apollo’s third major foreign acquisition after those of Dunlop South Africa for Rs 290 crore in 2006 (sold to Japan’s Sumitomo Rubber Industries for Rs 340 crore last month) and Netherlands-based Vredestein Banden BV for an undisclosed sum in 2009.

A consortium of four banks — Morgan Stanley, Deutsche Bank, Goldman Sachs and Standard Chartered — will raise $ 2.5 billion of new debt for Apollo to fund the acquisition. Of this, while $1.8 billion will be raised through issue of bonds, another $300 million will be brought in via asset-based lending. An additional debt of $400 million on books of Cooper Tire will also get rolled over to Apollo. The Indian company will, however, service new debt of $450 million after the acquisition — the remaining debt would have exposure to Cooper’s cash flows.

For more visit: Business Standard

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