Alliance Tire Group (ATG) will continue to operate as an independent strategic business unit led by its existing management team, including Yogesh Mahansaria, after it becomes a part of Yokohama Rubber Co Ltd post the acquisition announced on March 25. The acquisition is expected to be finalised on July 1, 2016, after the completion of all necessary closing procedures, including regulatory approvals.
On Friday, Yokohama Rubber Co said it reached an agreement with global investment firm KKR and other concerned parties to purchase all the shares of ATG for about $1.2 billion ($1,179 million to be precise). With the acquisition, Yokohama Rubber plans to expand its commercial tyre business. Currently, it does not manufacture or sell tyres for agricultural or forestry machinery.
ATG, on the other hand, has developed a highly specialised business in the manufacture and sale of tyres for agricultural, industrial, construction and forestry Demachinery. ATG sells radial and bias tyres for the aforementioned types of vehicles in 120 countries around the world, with a focus on the North American and European markets.
Demand for agricultural equipment tyre is expected to increase as a result of the growing use of agricultural machinery, which is crucial to improve agricultural efficiency to meet the increasing food needs for the world’s growing population.
Yokohama Rubber is currently in Phase IV (2015–2017) of its Grand Design 100 (GD100) medium-term management plan. This plan has established the expansion of the business in commercial tyres as a new core pillar of Yokohama Rubber’s tyre business strategy, and the company is accordingly devoting considerable resources to developing and expanding sales of ultra-large radial tyres for mining and construction equipment. Also, Yokohama Rubber recently started production of truck and bus tyres at a new plant in Mississippi, US, and it plans to continue promoting local production for local consumption. The ATG acquisition will strengthen the Yokohama Group’s business in commercial tyres and accelerate its ongoing globalisation.
ATG, which has two plants in India and one plant in Israel, was established in November 2006 and had annual sales of $529 million and operating profit of $95million for FY2015.
KKR had bought ATG in 2013 for an amount rumoured to be around $500 million from private equity firm Warburg Pincus. By the looks of it, KKR could have made 2.2x returns in this exit. In 2007, Warburg Pincus joined hands with Yogesh Mahansaria, an Indian tyre industry entrepreneur, to acquire the Israel-based Alliance Tire Co Ltd for $150 million. Later in 2009, Warburg Pincus invested an undisclosed additional capital in the company to fund its acquisition of the off-road tyre assets of US-based GPX Corp.