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| Edited By: Yuga Chaudhari,Neha Rishi |Source: DNA |Updated: Mar 18, 2018, 02:32 AM IST
German automotive group Continental AG has signed an agreement with Modi Rubber to buy 100% shareholding in the latter’s subsidiary — Modi Tyres.
Though it refused to disclose the deal size, Continental said the completion of the transaction still depends on the fulfilment of several conditions.
Post completion of the transaction, Modi Tyres will become a wholly owned subsidiary of Continental Corporation.
“The company will focus on local production and distribution of bias and radial truck/bus tyres as well as radial passenger car tyres for the Indian market,” Continental said in a statement.
Modi Tyres earlier had a technical collaboration with Continental through which Continental branded truck and bus cross ply tyres were produced at Modi Tyres’ plant at Modipuram in Meerut, Uttar Pradesh, which has annual capacity of over 1 million bias truck and bus tyres and tubes.
Industry experts said the deal was delayed due to labour issues at Modi Tyres plant in Uttar Pradesh.
Prakash Diwan, research head, Networth Securities said the deal is taking time because Modi has many labour issues which Continental would want resolved before the acquisition. Valuations might not be a big issue in this deal.”
Modi Rubber had re-entered the tyre market through its subsidiary Modi Tyres in 2009. Modi Tyres specialises in non-radial tyres of trucks, buses, tractors and passenger cars. Post the acquisition, Continental is looking at utilising company’s facility to produce radials.
Mahantesh Sabarad, senior analyst, Fortune Broking, said, “It makes sense for Continental to acquire Modi as it will cut time in setting up a greenfield facility that would require Foreign Investment Promotion Board approval and land clearance.”
Continental has a strong presence in India, with offices in cities including Bangalore, Pune and Delhi. Continental’s Automotive group has plants in Bangalore, Pune and Delhi, a technical centre in Bangalore, and two joint ventures — in Delhi and Chennai.
With sales of €26 billion in 2010, Continental is one of the major automotive suppliers worldwide. The company supplies brake systems, systems and components for powertrains and chassis, instrumentation, infotainment solutions, vehicle electronics, tyres and technical elastomers to auto players worldwide.
