Further speculation on potential Multistrada purchase

Following earlier reports from multiple sources that Indonesian tyre manufacturer Mulistrada is for sale, further details of the potential purchase have emerged. We already heard that Hongkong and Shanghai Banking Corporation (HSBC) was said to have been named as advisors relating to the sale, but the latest update is that the floor price for the final bid is at least 600 rupiah per share, reflecting 15.07x price to earning ratio (PER) in 2011. Dealer blog Insider Stories reported its sources as saying: “I heard that the floor price is 600 per share. But, there is an opportunity to raise the bid up to 800 rupiah per share.”

Furthermore the three bidder linked to the sale (Hankook, Yokohama and TPG) are said to have have proposed their final offer at the price “not more than 800 rupiah per share”, or below US$230 million for 40 per cent stake or 2.45 billion shares. Initial reports spoke of values closer to $200 million.

However, analysts pointed out that if TPG, for example, offered 800 rupiah per share, it would work out as more than 20x price to earnings ratio this year, which way above local competitor PT Gajah Tunggal Tbk which by the same measure is valued at 12.5x price to earnings ratio.

That said, the prize of controlling Multistrada could be what the bidders are wanting to pay for. Officially, Multistrada is 27.3 per cent owned by PVP XVIII Pte Ltd Singapore, PT Central Sole Agency. A wholly owned subsidiary of Salim Group’s PT Indomobil Sukses Makmur Tbk, owns 9.6 per cent, while The Bank of New York Melon holds 7.3 per cent. With public investors holding the remainder, according to Insider Stories.

Also there is some discussion as to the exact nature of Mulitrada’s position in the domestic market. According to data produced by the Indonesian Tire Producers Association (APBI) last year and again cited by Insider Stories, Multistrada was Indonesia’s fourth largest tyre manufacturer and not the second largest player as some have said. As things stand, Multistrada’s 8 million tyres a year of sales represent a reported 16 per cent market share, which is some way of Bridgestone and Sumitomo Rubber (Dunlop)’s 31 per cent and 22 per cent market shares respectively. Well known GiTi company Gajah Tunggal is ranked third with a 18 per cent market share.

Related news:

• Hankook, Yokohama and TPG linked to Multistrada purchase rumours

• Multistrada to run rubber plantation

• Multistrada Reports Record Domestic Sales