A New Beginning

Nevertheless Vredestein’s re-marriage to an ambitious manufacturer with its own designs on European market access puts the new combined company just outside the top 10 global tyre manufacturers, somewhere around 12 or 13; fulfils Vredestein’s desire to find emerging market production capacity and a route into the related sales markets; and is being hailed as a new beginning for Dutch tyre maker. Tyres & Accessories recently travelled to Apollo Vredestein BV’s Enschede headquarters and asked the newly merged company’s CEO, Rob Oudshoorn, why it will be second time lucky for the tyre manufacturer.

Apart from the fact that Vredestein’s two recent parent companies offer similar access to low cost production and emerging market sales opportunities, there are very few similarities between Amtel and Apollo when it comes to approach. This, according to Oudshoorn, is why there was a corporate sigh of relief at Vredestein when the company sealed the deal with Apollo just a couple of months ago; shoring up its own position and defending it from any less accommodating moves. What was not widely publicised till now was that Vredestein has effectively been up for auction since September. According to Oudshoorn interest in the company was strong and there were fewer parties who didn’t express interest in the company than those that did. Specifically this means interest from many of the well-known western and Far Eastern tyre manufacturers. The reason for all the interest in Vredestein, in addition to the company’s modern facilities and forward-looking approach, is that it is one of only two independent companies remaining in Europe (the other being Nokian). And for anyone looking to attain a foothold in Europe the fact this company comes with a R&D centre and an established sales and distribution network makes it a more attractive prospect. While there was no shortage of potential buyers from the external tyre world, there was also a strong bid for a management buyout from within the company.

Tyres & Accessories understands that this option was very much in the running throughout the process and had the potential to be successful. Speaking exclusively to T&A, Rob Oudshoorn explained that early interest was shortlisted to three or four serious bids, before being further reduced to two options – the MBO route or Apollo’s bid. In the end Vredestein’s management decided the merger with Apollo was in Vredestein interests so this made the way clear for Vredestein to accept Apollo’s bid. So what did they pay? With all the reported interest in Vredestein, one might expect this to drive the price up. However, the reality of the situation is that the auction was taking place at the very bottom of the cycle in what can only be described as a buyers’ market, with the assessed value of all the leading automotive suppliers and tyre makers taking a particularly battering. Oudshoorn wouldn’t comment on what the exact price tag was, but in the light of the estimations currently being thrown around by financial analysts, T&A understands that the real price tag was at the bottom end of the 175 to 220 million euro range – roughly the same price that previous owner Amtel paid for Vredestein Banden in 2005. Whatever the exact amount Apollo paid for Vredestein (and this is likely to be confirmed in Apollo’s full year financial results), it is now clear that the purchase was made using the 220 million euros originally earmarked for the construction of a greenfield production site in Hungary. Apollo’s plans to build its “European Manufacturing and High Technology Centre” in the city of Gyöngyös faltered in mid-August 2008 when the company admitted production at the facility wouldn’t begin before 2010. At the time reasons given were “unexpected delays in administrative processes” and “a divisive referendum on the investment for the local community.”

Be that as it may, it is also likely to be more than a coincidence that Apollo pulled the plug on its Hungary plans at the same time as the Amtel-Vredestein board announced a $222 million dollar full-year 2007 loss and approved a reverse takeover of Sibur Russian Tyres. It appears that Apollo has decided to avoid the political and regulatory pitfalls (not to mention volume and distribution pressures) of building on a Greenfield site, in favour of buying an existing profitable operation which comes with already established brands, sales and marketing network and an R&D centre – all for roughly the same price. See July’s Tyres & Accessories magazine for the complete story…