Yokohama acquires YHI share in Chinese JVs

In order to fund other expansion programmes, YHI International Limited has sold its share in two joint-ventures it operated in China. In a disclosure made to the Singapore Exchange, YHI reports that on July 29 it entered into two agreements with Yokohama Rubber (China) Co. Ltd to sell Yokohama China its ten per cent stake in Hang Zhou Yokohama Tire Co Ltd and its 49 per cent share in Yokohama Tire Sales (Shanghai) Co. Ltd; the transaction will give Yokohama China 100 per cent equity in both joint venture operations. The stakes in Hang Zhou Yokohama and Yokohama Shanghai have been purchased for S$14,336,052 (£7.28 million) and S$7,999,944 (£4.06 million) respectively.

Hang Zhou Yokohama is a company established in Zhejiang province, China and its principle business is in the manufacture and sale of Yokohama tyres, while Yokohama Shanghai’s principle business is the distribution and sale of tyres produced by Hang Zhou Yokohama; Yokohama Shanghai has distributed Hang Zhou Yokohama’s products since 2006.

YHI decided to sell its share in the two operations after its Board of Directors re-evaluated the company’s businesses and opportunities in China and “identified a different priority in the management of its capital.” The divestment allows the YHI to unlock the value of its investments in Yokohama Shanghai and Hangzhou Yokohama and utilise the proceeds to supplement its working capital and expansion plans, including a project to add a further five million alloy rims capacity to its existing factories in China, Taiwan and Malaysia by financial year 2015. When completed, YHI will achieve a total annual production capacity of 8.4 million alloy rims. The additional alloy rims capacity will largely be used to supply OEM customers in China.

The Singapore-based company says it also intends for its distribution business to pursue a multi-product, multi-brand and multi-category marketing strategy. It aims to achieve this by selling its distributed plus its own proprietary tyres, alloy rims and batteries to its entire existing sales network while also establishing a new sales network in emerging markets.

In line with the company’s five-year business expansion plan, which was announced in February 2011, the divestment is seen as opening up an opportunity for YHI to supply its Chinese customers with a wider range of tyres and related products, especially from the company’s own stable of products, and to further develops its sales network in the growing Chinese market. Thus, the Board of Directors says it believes the sale to be in the company’s best interest.