Apollo’s Vredestein Acquisition Worth $300 Million – Analyst

The Apollo Tyres acquisition of Vredestein Banden, which should be finalised in late May, is said to be a deal worth in the vicinity of US$300 million. This figure was put forward by India’s Hindustan Times and was provided by an industry analyst who wishes to remain anonymous.

“Vredestein was bought over by Amtel in 2005 for $260 million so this acquisition would at least amount to $300 million,” said the analyst. “The deal is a win-win situation for Apollo as it not only gets access to high-end technology which it can also bring into India, but also a firm marketing and sales foothold in Europe.”

The purchase of Vredestein Banden will help Apollo to make further inroads into the European and US markets, something the Indian company has long desired. Apollo Tyres recently drive into the premium markets of Europe and US — which the company has been attempting for some time. In February announced the postponement of plans to set up a greenfield plant in Hungary, citing the need to reduce capital expenditure and delays in gaining necessary approvals as factors behind the move.

“We are looking at closing the deal by the middle of this month,” said Neeraj Kanwar, vice chairman and joint managing director, Apollo Tyres. “Vredestein is a premium tier-one tyre manufacturer with a portfolio of high-end, high speed-rated passenger car tyres going up to a speed of 300 km per hour. We have a high synergy, but I will be able to give you details on this only once we achieve closure.”

According to figures published by the Hindustan Times, Apollo produces around 3.8 million passenger car radials in a year and exports around 700,000 units per annum. Vredestein Banden has a capacity to make 5 million tyres per annum. Although Vredestein Banden’s parent company in Russia, Amtel Vredestein, was declared bankrupt late last month, Kanwar claims the Dutch firm, which recorded a $307 million turnover in 2007-08, has a strong balance sheet. “Vredestein is not a bankrupt company. It has been in continuous production and is financially healthy,” Kanwar said. “It has been growing at a CAGR of 8.5 per cent for the last five years, which is far higher than the European growth rate.”