JK Tyre & Industries has
finally confirmed that it is buying Cavendish Industries Ltd (CIL) tyre unit of Kesoram Industries. In a
press release, the company stated that JK Tyre & Industries Limited (JK
Tyre) and JK Asia Pacific Singapore Pte Limited, a wholly owned subsidiary of
JK Tyre, have signed a binding term sheet with Kesoram Industries Limited (KIL)
to acquire 100pc equity in Cavendish Industries Limited (CIL). CIL houses a
Tyre Business Undertaking located at Haridwar (Laksar) which manufactures a
range of tyres, tubes and flaps.
Incidentally, in March this
year the B K Birla group company Kesoram Industries Limited (KIL) had announced
that it had transferred its Haridwar unit to its subsidiary Cavendish
Industries Ltd at a value of Rs.2,800 crore. The deal was effective April 1,
2015. Kesoram Industries tyre unit operated under the brand name Birla Tyres.
The Uttarakhand unit is the
bigger of KIL’s two tyre units (the other being in Odisha) with a daily
capacity of 600 tonne. Set up in 1919 as Kesoram Cotton Mills, the group today
has three business verticals — tyres, cement and rayon. Tyres account for
around 60 per cent of its turnover, followed by cement.
Meanwhile, JK Group has agreed
for this acquisition at an enterprise value not exceeding Rs 2200 crores,
subject to conditions, wherein JK Tyre will hold the largest shareholding block
and shall have substantial management control of CIL with an option to place
upto 55pc with its Associates/Group Companies.
The acquisition is proposed to
be funded, by combination of debt and internal accruals raised by JK Tyre and other JK Group entities. The financial
exposure of JK Tyre in the acquisition is expected to be of the order of Rs 450
crore. The final transaction is expected to consummate over next few months
(subject to various approvals) with definitive documentation expected to be
executed between the parties in due course of time.
The acquisition will provide
JK Tyre with further impetus towards ready expansion in the Truck & Bus
Radials segment where it is a market leader as well as entry into the fast
growing 2 / 3 Wheeler tyre market. Accordingly, JK Tyre estimates the
transaction to be strategic, revenue accretive and synergistic with its
existing tyre business.
Dr Raghupati Singhania,
Chairman of JK Tyre stated “The Transaction is a reflection of the inherent
strength of the Company in undertaking acquisitions with turnaround potential
and successfully delivering results to all the stakeholders in the business.
This was recently evidenced by a similar success story in JK Tyre’s acquisition
of Tornel, Mexico.”
JK Group, is one of the
leading conglomerates in India with business interests in automotive tyres,
cement, paper, auto-components and other businesses. The flagship company of
the JK Group in the Tyres’ Business, JK Tyre & Industries Limited is
amongst the top three automotive tyre manufacturers in India with presence in
truck, bus, passenger cars and other vehicles, having nine manufacturing plants
all over the world, global dealer and distribution network and strong brands
(JK Tyre, Vikrant, Tornel). JK Tyre is amongst the largest players in
tyres in India and parts of Asia.
Aurum Equity Partners LLP is acting
as transaction advisors to JK Group for this deal.
Source: JK Tyre/
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