S8 Capital paid €78 million for Continental assets; also owns Cordiant

Continental didn’t receive very much for its tyre factory in Russia, and S8 Capital is now one of the country’s top-three tyre makers. The investment company has four tyre brands in its portfolio at the moment, and additional, renamed brands will join these by the end of this year.

In its financial report for the half-year to 30 June 2023, Continental Group reports selling its entire Tires business operations in Russia as well as some ContiTech segment operations for 78.0 million euros. The carrying amounts of its outgoing net assets came to 81.2 million euros, including 39.9 million cash and cash equivalents. Continental further shares that the entire transaction resulted in expenses of 79.2 million euros.

The price S8 Capital paid thus falls in the middle of the expected sale price of 7 to 10 billion roubles (66.1 million to 94.5 million euros) and is a fraction of the amount Continental had invested in its Russian tyre factory. An estimate provided in 2018 by the government of the Kaluga region, where the plant is located, indicates the tyre maker invested “over 250 million euros” to construct and develop the facility.

Cordiant an S8 business too

The acquisition of Continental’s Russian tyre business in May 2023 is thus a valuable addition to S8 Capital’s business portfolio, but it wasn’t the only tyre-related transaction the investment company made that month. Moscow-based newspaper Kommersant wrote on 30 May about S8 Capital’s acquisition of a 100 per cent shareholding in Russian tyre maker Cordiant from its management owners. The financial details of this transaction were not published.

Cordiant, which was known as Sibur-Russian Tyres prior to April 2012, operates two facilities in the Omsk region (including the former ZAO Matador-Omskshina joint venture plant that for a time was part-owned by Continental) and a third in Yaroslavl. According to the company’s own website, Cordiant has capacities to produce around 8 million tyres annually, but Kommersant says S8 Capital estimates capacities to be higher, at around 9 million. Market statistics seen by the newspaper suggest that as of 2020, Cordiant held a 9.6 per cent share of Russia’s passenger car tyre market, 11.1 per cent of the light truck tyre market, 17.4 per cent of the market for all-steel truck tyres and 31.8 per cent share for on-/off-road truck tyres.

Cordiant claims capacities of around 8 million tyres a year (Image: cordiant.eu screenshot)

Together with the former Continental factory in Kaluga, S8 Capital anticipates an overall capacity to manufacture 14 million tyres a year. This would make S8 Capital Russia’s third largest tyre maker, behind Tatneft, which is producing 17.5 million tyres annually at the factory it acquired from Nokian Tyres, and Nizhnekamskshina, the 15 million tyre per year former Tatneft asset.

“With the acquisition of Cordiant JSC, we will be able to offer the market a wide product line of passenger, light truck and truck tyres from economy to premium segments in the very near future,” says Thorsten Schubert, managing director industrial assets at S8 Capital. Schubert also sees opportunities for technology and know-how synergies between S8’s Continental business and Cordiant’s Intyre R&D centre.

Additionally, S8 Capital is still rumoured to be negotiating to acquire the Bridgestone tyre plant in Ulyanovsk. Should it take on this asset, the company will become Russia’s second-largest tyre maker.

What’s in a name?

As mentioned, S8 Capital currently owns four tyre brands. These are Cordiant and associated brands Tunga and TyRex, as well as Gislaved. Of the three tyre brands that Continental produced in its Kaluga factory, Gislaved is the only name that the new owner is authorised to use. This means all Continental and Matador tyres produced in Kaluga must be rebranded before the agreed transitional period expires at the end of 2023.

According to the Russian daily newspaper Izvestia, S8 Capital admits having already begun the rebranding process. It hasn’t disclosed the names it intends to use, but Izvestia notes that about a month before the acquisition was finalised, Continental Tires Rus filed applications to register several new trademarks. It says SPARK-Interfax data shows applications for several names that replace the currently-used word ‘Contact’ with ‘Control’ – CrossControl and CrossControl ATR, PremiumControl and PremiumControl Pro, SportControl Pro, TerraControl and TerraControl ATR, UltraControl.