JK Tyre acquires Kesoram subsidiary, tyre factory

The acquisition of tyre, tube and flap manufacturer Cavendish Industries Ltd. has been approved by the Board of Directors at JK Tyre & Industries. The Indian tyre maker is acquiring 100 per cent equity in Cavendish from Kesoram Industries Ltd. for just under Rs 22 billion (£214.6 million). According to JK Tyre, it and other JK Group companies will fund the acquisition by a combination of debt and internal accruals, and JK Tyre’s financial exposure is expected to be some Rs 4.5 billion (£43.9 million). The deal is expected to close in December 2015.

Cavendish Industries currently produces tyres and related products for Kesoram’s Birla Tyres business at its facility in Laksar (in India’s Uttarakhand state), and its acquisition by JK Tyre will facilitate the new owner’s expansion in the truck and bus radial business – the plant is said to be capable of producing 440,000 truck tyres per annum – and its entry into the two and three-wheeler tyre market.

“The transaction is a reflection of the inherent strength of the company in undertaking acquisitions with turnaround potential and successfully delivering results to all stakeholders in the business,” commented Dr Raghupati Singhania, chairman of JK Tyre. “This was recently evidenced by a similar success story in JK Tyre’s acquisition of Tornel, Mexico.”

Kesoram Industries divested the Laksar factory to its subsidiary Cavendish earlier this year, however the company states that it “remains strongly committed to its presence in the tyre business” and will continue to be active in all market segments it services even after the sale of Cavendish. The production of Birla tyres will continue at the Birla plant in Basalore.