INDIA BUSINESS WORLD - APRIL 1st - APRIL 15th - 2008
JK TYRE BUYS MEXICO CO FOR RS 270 CRORE
In its first overseas acquisition, tyre major JK Tyre & Industries, has bought the privatelyheld Mexican tyre company Tornel for Rs 270 crore.
JK Tyre plans to raise funds through a special purpose vehicle (SPV) in Mexico and the buyout is expected to close by May-end. Tornel’s annual turnover is around Rs 800 crore ($202 million in 2007), while JK Tyres’ turnover was in excess of Rs 3,200 crore in the last fiscal, of which Rs 500 crore accounted from exports. In 1997, JK Tyres had acquired a 51% stake in the domestic tyre company, Vikrant Tyres.
JK Tyres & Industries vice-chairman and managing director R P Singhania told mediapersons: “We will raise the money though internal accruals and debt, which will be structured though an SPV. Tornel will be a fully-owned subsidiary of JK Tyres and there will be no dilution of the existing share holding in the company. We shall also bring a rights issue in the next few months, which will be in the ratio of 3:1, to help bridge funds. The issue price will be determined at the time of offer.”
This acquisition will take JK Tyres’ annual capacity to 153 lakh tyres of which 66 lakh will be contributed by Tornel, making it the largest tyre manufacturer in India. the company’s four plants together have a combined production capacity of 650 tonnes a day, while Tornel’s three plants have a production capacity of 290 tonnes a day from its 2,000 employees. The 100% acquisition will allow JK Tyre to expand its largest overseas markets in America and gain free access to the North American market through a range of free trade agreements (FTAs) that Mexico has with these countries.
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