Toyo to Acquire Malaysian Tyre Manufacturer

Toyo Tire & Rubber has announced its decision to acquire all shares in Malaysia-based tyre manufacturer Silverstone Berhad. The company’s board of directors says it has a stock purchase agreement with Silverstone’s sole shareholder, Silverstone Corporation Berhad. According to the company’s statement, Toyo’s acquisition of Silverstone puts it in position “to make a full-scale entry into the fast-growing Southeast Asia market.” The stock transfer to Toyo from Silverstone Corporation Berhad is scheduled to take place in late January 2010 and will cost Toyo approximately 12,538 million yen (£98 million).

Toyo plans to commence production of Toyo and Nitto brand tyres at the new subsidiary “as soon as practicable”, while building an export distribution network centred on Asia. It also has plans to develop the quality of Silverstone brand tyres, with the goal of expanding sales throughout Asia. Toyo believes this action is “strengthening the foundation of its tyre business”, and has “established a plan for growth and cost competitiveness”. The move should – if all goes to Toyo’s stated plans – increase Toyo’s corporate valuation.

Toyo’s marketing strategy and planning manager – Europe, Mike Rignall told Tyres & Accessories: “we are very pleased at this news as it demonstrates the company’s commitment to building our business. We will use this acquisition to produce Toyo and Nitto brand tyres as well as Silverstone. Any extra production capacity which is available is good news for us.” In common with many other tyre manufacturers, Toyo has strained to produce enough tyres in the last 12 months. The new acquisition will naturally improve capacity, though details of the distribution of Silverstone and other products made at the facility are yet to be finalised.

Toyo is currently at work on the third phase expansion of its Toyo Tire North America Manufacturing facility, and has commenced construction of a China tyre manufacturing plant at Toyo Tires Zhangjiagang.

The acquisition of Silverstone comes nearly three years after the pulp and paper producer Lion Forest Industries purchased stakes in the Malaysian company that owns a 100 per cent stake in the tyre-maker, Silverstone Corporation. In 2005, Lion Forest’s proposal to acquire Silverstone Corporation in full was turned down by the local Securities Commission. Then in 2007, Lion bought a 70.64 per cent stake in the manufacturer’s debts, which gave it a position as a major stakeholder in Silverstone Corporation. Lion owned a 75 per cent stake in a Chinese tyre manufacturing and distribution joint-venture with Shandong LuHe Group and used the deal to “leverage on SCB’s technological and manufacturing know-how to complement… [its] tyre business in China.”

In the years since then, Lion has upped its stake in Silverstone Corporation to 203.9 million shares, making an 84.2 per cent share in Silverstone’s parent company. It was reported by Reuters that Lion will now receive 462 Malaysian ringgit (£94.4 million) from Toyo’s acquisition. Lion told the local stock exchange that its share in Silverstone Corporation was worth 240.8 million ringgit (£49.2 million) on 30 June, 2010, while the original investment of Silverstone Corporation in Silverstone Berhad was 255.7 million ringgit in 2003.

Lion stated: “The proposed disposal provides a timely opportunity for Silverstone Corporation Berhad to realise and unlock the value of its investment in Silverstone Berhad. The gain to Lion Industries arising from the proposed disposal is approximately 140 million ringgit [£28.5 million].”