Amtel-Vredestein, Sibur Holding Deal will Create ‘Top 10 Tyre Producer’

Amtel-Vredestein has reached an agreement with Sibur Holding that will see it acquire Sibur Russian Tyres in exchange for 159.3 million new Amtel-Vredestein shares. Amtel-Vredestein will also carry out a $150 million share placement, and Sibur Holding has already agreed to acquire $50 million worth of these shares. As a result, Sibur Holding will own 70 per cent of the new expanded tyre operation. This deal, which values Sibur Russian Tyres at approximately US$318.6 million, promises to create “one of the leading diversified tyre producers in Europe and one of the top 10 tyre producers worldwide,” states Amtel-Vredestein.

The acquisition will give Amtel-Vredestein access to a $40 million line of funding from Sibur Russian Tyres. Media reports earlier in the year suggest Amtel needs roughly $20 million a month to keep raw materials flowing into the production process during the transition. As a result, the deal is expected to be completed in the second half of 2008.

Following the initial acquisition of Sibur Russian Tyres, the terms of the agreement call for Amtel-Vredestein to conduct a $150 million private share placement at a subscription price of not less than $1.89 per share. Sibur Holding has already agreed to purchase shares to the value of $50 million. Following a successful completion of this share issue, Sibur Holding will own 70 per cent of the new, larger tyre company and no less than 60.5 per cent of Amtel-Vredestein’s enlarged share capital as a result of the acquisition and placement. Sibur Russian Tyres chief executive Vadim Gurinov will head Amtel-Vredestein following the transaction.

Furthermore, Sibur Russian Tyres has agreed to provide Amtel-Vredestein with an interim funding facility of $40 million, subject to the agreement of the second company’s shareholders. The interim funding will be provided in two tranches; $20 million will be immediately available to Amtel-Vredestein upon signing a definitive agreement, and the balance available upon Amtel-Vredestein’s shareholders passing the required resolutions at the EGM. The amount raised through the interim funding is intended to enable Amtel-Vredestein to meet its liquidity requirements until completion of the acquisition and placement.

Amtel-Vredestein notes soberly that, in light of its difficult financial position, the transactions with Sibur Holding are “considered essential to the continued viability of Amtel-Vredestein as a going concern and, without the transactions, Amtel-Vredestein’s debt restructuring cannot succeed.”

“This is a significant achievement for Amtel-Vredestein and Sibur Russian Tyres and for their shareholders as well as all stakeholders,” commented Petr Zolotarev, CEO and chairman of the Amtel-Vredestein Executive Board. “The combination of the two businesses as well as the placement will provide the enlarged group with a stronger balance sheet and essential funding to continue operating as one of the leading global tyre manufacturers, creating at the same time one of the leading companies in the Russian market. Going forward, the enlarged group will benefit from greater economies of scale, enabling it to compete more efficiently. ”

Alexander Dyukov, chairman of the Boards of Sibur Holding and Sibur Russian Tyres, commented that “The transaction will create one of the top 10 tyre producers worldwide, and is in line with Sibur Holding’s strategy to increase the value of its tyre business.” Sibur Russian Tyres CEO Vadim Gurinov added “the Russian tyre market has a very high growth rate and the enlarged group will be very well positioned to benefit from the growth, finding itself in a win-win situation. In addition to leading positions in the truck and off-the-road tyre segments, the group gains the same positions in the passenger and light trucks tyre segments and becomes an undisputable market leader in Russia and the largest tyre manufacturer in Eastern Europe. Moreover, by this combination, we are able to reach additional synergies through acquiring an up-to-date research base, high-quality tyre brands and a wide European distribution network. From my point of view, this business combination provides us with great prospects and development opportunities.”

Russia’s economy is growing strongly, comments Amtel-Vredestein, adding that the enlarged group will be better positioned to benefit from this and compete effectively with foreign competitors. Furthermore, it states, “the parties are confident there is significant scope for realising synergies by combining the operations of the two companies in areas of manufacturing, research and development, administrative cost savings and a rationalisation of the capital investment programme.”