India's Apollo Tyres has agreed to buy famed American tire manufacturer Cooper Tires in a $2.5 billion.
The deal would make the combined company the seventh-largest tire maker in the world and reduce Apollo's dependence on the flagging Indian automobile sector.
Cooper, founded in 1914, is the second biggest US tire maker and specializes in America's lucrative market in tires for light and medium trucks.
Apollo, which currently gets two-thirds of its revenue from India, will pay $35 per share, representing a premium of about 43 per cent to Cooper’s current share price.
“It is very important for us to expand our horizons. Especially in the long run, the U.S. market is going to look up …,” Apollo chairman Onkar Kanwar told Reuters.
Indian car sales fell 7 per cent in the financial year that ended in March, the first annual fall in a decade, while sales in Europe, Apollo’s second-largest market, are at a 20-year low.
But auto sales are one of the bright spots for the U.S. economy. Sales in the second biggest auto market after China rose more than expected in May as construction workers and oil drillers bought more pickup trucks, and they are expected to remain strong for the rest of the year.
The deal is the latest in a string of big overseas acquisitions by Indian companies in recent years, including Tata Motors Ltd.’s $2.3-billion purchase of Jaguar Land Rover and mobile operator Bharti Airtel Ltd.’s $9-billion takeover of the African operations of Kuwait’s Zain.
It is also another example of an Asian company buying a well-known U.S. firm, coming just two weeks after China’s Shuanghui Group agreed to buy Smithfield Foods Inc. for $5-billion.
Ohio-based Cooper employs nearly 13,000 people around the world. Apart from North America, it has manufacturing facilities in England, Serbia, Mexico and China.
Kanwar has expanded Apollo, which had revenue of $2.5-billion in 2012, after taking control of the company in 2002, following a prolonged public spat with his father, who founded the company in 1976.
His previous acquisitions include South Africa-based Dunlop Tyres International Ltd. in 2006 and Dutch tire-maker Vredestein Tires in 2009.
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