INDIA'S largest tyremaker Apollo Tyres has acquired Dutch tyre company Vredestein Banden BV for an undisclosed sum, gaining a foothold in the lucrative European tyre market and raising its annual turnover by a quarter.
Vredestein Banden, with estimated annual revenues of � 300 million ($403 million), was a subsidiary of Russia's largest tyre manufacturer Amtel-Vredestein, which went bankrupt last month.
"This strategic acquisition will bolster Apollo's plans for its European customers. We have acquired one of the most profitable tyremakers in Europe and will get direct access to the Vredestein's large market in Europe," said Onkar S Kanwar, chairman and managing director of the Delhi-based Apollo Tyres.
The Dutch firm, which is likely to be renamed Apollo Vredestein BV, will be integrated with the BSE-listed Apollo in the next few months. The process will be undertaken jointly by both the companies to develop synergies in the field of marketing, technology, manufacturing and human resources.
Vredestein is one of the most profitable tyremakers in Europe with a compounded annual revenue growth rate of 8.5% for the past five years. It has capacity to produce 5.5 million tyres annually, which takes Apollo's total tyre capacity to 16.8 million. The acquisition will push Apollo Tyres' annual turnover to Rs 7,200 crore. The company targets Rs 10,000-crore revenues by fiscal 2010. Apollo Tyres raised funds for acquisition through a combination of internal accruals and debt. The company was advised by KPMG, Nomura and CMS Derks Star Busmann on the transaction.
Mr Kanwar said Apollo has deferred its plan to set up a greenfield plant in Hungary with a proposed investment of � 200 million to produce 70 lakh tyres a year. This is due to land acquisition problems in the East European country. Instead, it will now concentrate on consolidating operations in Holland. Vredestein is Apollo's second international acquisition after it acquired Dunlop in South Africa for Rs 290 crore three years ago.
Vredestein makes ultra-performance high-speed car tyres and supplies to several top-end car makers like Audi and Porsche. It's largest market is Germany which accounts for almost a third of its total production. Vredestein also caters to the European Union, Middle East and the US markets.
Its manufacturing unit, located in Enschede close to Amsterdam, currently employs around 1,500 people. It sells tyres under the mother brand Vredestein and another brand called Maloya. "We are looking at taking Vredestein's high-performance tyres to other markets, while Apollo brand will now get a direct entry into the highly competitive Europe market," Mr Kanwar said.
The Dutch firm was under local court administration and following the bankruptcy of its Russian parent Amtel-Vredestein, all the regulatory approvals for the acquisition process came through the court.
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