Apollo to buy Cooper Tire for Rs 14,500 crore

In the biggest deal of its kind by any Indian auto company, Apollo Tyres, the country’s second-largest tyre-maker, will acquire a 100% stake in the US-based, NYSE-listed tyre-maker Cooper Tire & Rubber Company for Rs 14,500 crore ($2.5 billion).

Post-acquisition, Apollo will become the seventh-largest tyre company in the world with over Rs 35,000 crore ($6.6 billion) in revenue.

“India’s tyre companies are looking at international geographies in order to offset the slowdown in the domestic market,” said Vishal Srivastav, research manager at Credit Analysis & Research.

Cooper stockholders will receive $35 per share in cash, a 40% premium to Cooper’s 30-day volume-weighted average price. The market capitalisation of Apollo Tyres is Rs 4,637 crore, while Cooper is valued at Rs 8,957 crore. The deal will likely improve Apollo’s standing in the global tyre industry.

The acquisition will give Apollo access to developed markets like the US and emerging markets like China.

“We expect both companies to benefit out of the acquisition. We will get an access to new markets like China where we foresee huge opportunities,” said S Kanwar, chairman, Apollo Tyres. 

With almost 13,000 employees globally, Cooper Tire is currently the eleventh largest tyre manufacturer in the world, and the fourth largest in the US, while Apollo Tyres ranks No.17.

The Indian market contributes 65% of Apollo’s total revenue.

Post-acquisition, however, the figure will go down to 22%; the US will contribute 43-44%, China 18% and Europe and other geographies the rest.

Apollo currently is the leader in the truck radials segment with a market share of 31%. It has a market share of 18-19% in the passenger car segment. Post-acquisition, its capacity of 1,500 tonne a day will increase to 3,500 tonne a day. 

As for Cooper, it specialises in passenger car and light commercial vehicle tyres. In all, it has eight plants in different geographies, including the US, the UK, China and Mexico.

But it does not have a presence in the original equipment manufacturer or OEM segment in India.

Apollo did not clarify when it will introduce Cooper’s brands in India. “It is too early to say. Cooper is very strong in the sports utility vehicle (SUV) tyres. We might look at bringing the SUV tyre brand to India,” said Kanwar. 

Including its own brand of tyres, Cooper currently sells other brands like Mastercraft, Dean, Starfire, Roadmaster, Avon Tyres, Mickey Thompson, Dick Cepek, Chenshan, Austone and Fortune.

Roy Armes, Cooper’s chairman, CEO and president, said in a statement: “Together, our two organisations have almost no geographic overlap and significant opportunities for growth.... In a dynamic global tyre business, increased scale and expanded manufacturing footprint help to ensure long-term success.”

Analysts said the deal will have minimum impact on Apollo’s domestic market share.
“Not much is actually going to flow into the Indian market. Cooper is huge... sells some dozens of brands. The operations may become complex to handle,” said an analyst with a domestic brokerage.

It is also India Inc’s largest outbound deal this year. Tata Motors acquired British luxury carmaker Jaguar Land Rover for Rs 9,200 crore in 2008.