Apollo Tyres to acquire US-based Cooper Tire & Rubber for Rs 14,500 cr

The deal will be an all-cash transaction where in Cooper’s shareholders will receive $35 per share,a 40% premium to the 30-day volume-weighted average price. Cooper Tires is listed on the NYSE. The deal is valued at 4.4 times the Ebitda of Cooper.

After the conclusion of the deal,Cooper will be delisted and privately held by a wholly-owned subsidiary of Apollo. Although Cooper has a large shareholding of mutual funds,Apollo said that Cooper’s board is agreeable to the deal and has recommended the offer to shareholders.

Apollo,which has a debt-to- equity ratio of 1:1,will be raising $2.5 billion of new debt. Of the total new debt that will be raised,$2.1 billion will be backed by the cash-flows and assets of Apollo’s European subsidiary as well as Cooper’s cash flows and assets.

“Out of the total debt that is being raised $1.8 will be through bonds which have 7-8 year term,$300 million will be through asset-backed leveraging,all of this will be dollar loans raised by our European and international operations,” said Neeraj Kanwar,vice-chairman and MD,Apollo Tyres. “A further $400 million will be raised on the back of our Indian cash flows.”

Apollo’s revenue mix will change significantly after the acquisition. Currently,it earns nearly 60% of its revenues from India. After the deal,22% of its revenues will come from India,44% from US,18% from China and the rest from Europe and rest of the world,the company said.

Following the deal,the company will have three marquee brands — Cooper,Apollo and Vredestein. The sub-brands will be sold in specific markets,said Neeraj Kanwar. “Cooper makes tyres mostly for light trucks and SUVs,so that is the segment where we may bring in the brand into India,but it is too early to say when,” he added.

The acquisition will also mean that Apollo’s manufacturing capacity will more than double from the current 1,500 tonne per day to 3,500 tonne per day.

“This is a game-changer and if we hadn’t made this acquisition we would have grown at a much slower pace,” said Neeraj Kanwar.

The combination is expected to deliver value-creation benefits of approximately R465-700 crore ($80-120 million) per annum at the Ebitda level,the company added in a statement.

The two companies expect to close the transaction after getting regulatory approvals by the second half of 2013.