Apollo Tyres buys Cooper Tire for Rs 14,500cr; stk sinks
On a pro forma basis, Apollo's 2014-15 revenue and earnings could potentially more than double as a result of the buy, but Apollo's net debt-to-equity would rise even though Cooper Tire will service a significant portion of the additional debt, according to Goldman Sachs.
June 13, 2013 / 20:08 IST
Moneycontrol Bureau
Apollo Tyres plunged 15 percent in opening trade on Thursday following the company's announcement that it is buying US-based Cooper Tire & Rubber Company, in an all cash transaction of Rs 14,500 crore. Under the terms of the agreement, Cooper stockholders will receive USD 35 per share in cash. The transaction is a 40 percent premium to Cooper’s 30-day volume-weighted average price, Apollo said. Apollo said acquisition of Cooper, which is the 11th largest tyre company in the world by revenue, is the largest deal for the sector in India. It is the company’s third major acquisition in the last seven years. Post acquisition, Apollo will become the seventh largest tyre manufacturer in the world.Also Read: Teva, Sun Pharma settle patent suit with Pfizer for $ 2.15bnOn a pro forma basis, Apollo's 2014-15 revenue and earnings could potentially more than double as a result of the buy, Goldman Sachs analysts Sandeep Pandya and Sumeet Jain said. However, they added that Apollo's net debt-to-equity would rise even though Cooper Tire will service a significant portion of the additional debt. Cooper's focus has been on replacement tyres and supplies tyres through brands Cooper, Mastercraft, Starfire, Chengshan, Roadmaster and Avon. Both the companies had a combined sales worth USD 6.6 billion in 2012."We believe, execution is key in order to generate stable margins, particularly amid a volatile demand and raw material environment, and reduce leverage over time," the Goldman Sachs analysts said, maintaining their "neutral" rating on the stock. At 9:25 hrs, Apollo shares were down 15 percent at Rs 78.15 on NSE.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
