[arvindmanju]

Apollo Tyres is all set to take on bigger market, below is the link to the news.

REUTERS - Apollo Tyres Ltd agreed to buy U.S.-based Cooper Tire & Rubber Co for about $2.5 billion in a deal that would make it the world's seventh-largest tire maker and reduce its dependence on a slowing Indian auto market.

http://in.reuters.com/article/2013/0...95B09C20130612

[**r1d3r**]

In what's being cheered as the largest M&A deal in India's automotive history, Apollo Tyres has announced it will acquire US-based Cooper Tire & Rubber Company in an all-cash transaction valued at $2.5 billion or around Rs 14,500 crore .

Cooper Tire & Rubber is the parent company of a global group of firms that specialize in the design, manufacture, marketing and sales of car and light truck tyres. Cooper is the largest supplier of tyres to Sears, the US retailer.

The mega deal, which comes at a time when markets are depressed globally, will catapult Apollo from its 16th position in the global pecking order to being the 7th largest tyre company. It will have a footprint in both developing and developed markets, including the US and China, and churn out daily volumes of 3,500 tonne, double what it now clocks.

The deal, larger than Tata Motor's $2.3 billion Jaguar-Land Rover acquisition, will dramatically change Apollo's revenue mix. "From 65% India-specific revenue, Apollo will move towards 22% revenue from India, 43-44% from the US, 18% from China and the balance from Europe and the rest of the world," said Kanwar. Its geographical spread means Cooper will ensure Apollo gets roughly 50-60% of its revenue from high-margin developed markets, while high-growth China and India comprise around 40%.

Cooper has two plants in China, one each in the UK, Mexico and Serbia and three in the US. Apollo has six plants; the two companies had a combined revenue of $6.6 billion in 2012.

Link to the news article:
Times of India - http://bit.ly/18zW1RF
Reuters - http://reut.rs/14y0Pmm

[Mitzoomer]

This is indeed a big news in the Auto industry, especially when the car sales are dropping consecutively for long time now.
Lets see how the merger helps Apollo.

[SmartCat]

Indian companies never seem to learn from others' mistakes (Suzlon, GMR, Opto Circuits, GVK, Tata Steel, Hindalco, Aban Loyd etc). A company that is worth Rs. 5,000 crores cannot buy a company for Rs. 14,500 crores, and expect things to go smoothly. Basic economics demands that it has to be the other way round.

These guys see a fence with a board stuck on it "Electrified fence. Do not touch". But they still pee on the fence to see what happens.

[MaserQ]

This is a massive massive deal for Apollo. It will open up a whole new market for India's best tyre maker. But have they punched above their weight? Only time will tell. A bit like Tata's Corus takeover. Cannot fault their ambition though.

[**r1d3r**]

Originally Posted by smartcat

Indian companies never seem to learn from others' mistakes (Suzlon, GMR, Opto Circuits, GVK, Tata Steel, Hindalco, Aban Loyd etc). A company that is worth Rs. 5,000 crores cannot buy a company for Rs. 14,500 crores, and expect things to go smoothly. Basic economics demands that it has to be the other way round.

In any industry in general as long as you can finance a takeover and the board + stakeholders of the other company are happy with the outcome the resultant synergies have to offer than it doesn't matter whether you are half or 1/4 the size of the company you wish to take over. There are many such cases prevalent in different sectors. I have even seen this with my own eyes as the company I work for with a valuation $200 million dollars took over a company worth close to $500 million and everything went smoothly even after the transition. My company got direct access to newer markets and clients and better R&D, which translated into more profits for all us

As the report suggest i believe Apollo took this strategic decision with the same intent and if they can pull this off, this would really help them become a global brand and a lot less dependent on the Indian market. However, this is easier said than done, so only time will tell

[pacman2881]

Originally Posted by **r1d3r**

Link to the news article:
Times of India - http://bit.ly/18zW1RF
Reuters - http://reut.rs/14y0Pmm

Sorry for going OT. A kind request - please use actual URL and not shortened ones. I normally avoid such links due to security concerns.

I do not find any rule in TBHP on this. Mods can comment on this aspect.

[9thsphinx]

Two good things may come out of this piece of news.

1. The stock OEM quality of Apollo (mostly Acceleres) that we're used to seeing on so many vehicles these days may just improve a bit. Something is better than nothing!

2. Hopeful chances of seeing Cooper branded OEM tyres on the new lot of SUV's rolling out of Ford, Renault, VW and Hyundai et al instead of the otherwise MRFs (or whichever applicable).

Either way, in these dire times, it's great to hear that this takeover is one of the biggest in the automobile history till date - that too by an Indian company! Kudos.

[vindrider2626]

This acquisition seems to be doing nothing good for apollo as the stock price is hammered down 25% today.I think indian companies biting more than they can chew.

[manolin]

Originally Posted by vindrider2626

This acquisition seems to be doing nothing good for apollo as the stock price is hammered down 25% today.I think indian companies biting more than they can chew.

A short term dip in stock price is an indicator of the mentality of the brokers, and nothing else.

Leveraged buyouts are a bet, with a little bit of luck and careful preparation, they can give the benefits which are never possible through organic growth. And in some industries, if you don't buy your way out to a particular market size, you may be wiped out.

I am happy for Apollo. Apart from their equity contribution and guarantees to that extent which they would have given for the leveraged financing, they have not much to lose. A $450 million bet, or risk being marginalised to a nobody company, I think its good they took the bet.

[D33-PAC]

Originally Posted by smartcat

Indian companies never seem to learn from others' mistakes (Suzlon, GMR, Opto Circuits, GVK, Tata Steel, Hindalco, Aban Loyd etc). A company that is worth Rs. 5,000 crores cannot buy a company for Rs. 14,500 crores, and expect things to go smoothly. Basic economics demands that it has to be the other way round.

These guys see a fence with a board stuck on it "Electrified fence. Do not touch". But they still pee on the fence to see what happens.

Wait, do you mean to say you know more about business than the guy who went from 5 lakhs in inheritance from his father to being in the Forbes billionaires list ?

We keyboard warriors are in NO position to speak about their dealings....

[SmartCat]

Oversized leveraged buyouts have very low success rate - historically, and not just in India. There are a few successes here and there, but the failure rates are very high. There are a few issues with acquisitions like these -

1) Tendency to overpay for an acquisition
2) Interest costs

Whatever logic being put forward for the acquisition - the same results can more or less be achieved via technical collaborations & partnerships too. But you don't get to say "We are going to be the largest company in Asia" or "We will become the Xth largest company in the world" that way.

After 2008, acquisitions like these are almost always booed by shareholders. And they vote with their feet by getting out of the stock.

Originally Posted by D33-PAC

Wait, do you mean to say you know more about business than the guy who went from 5 lakhs in inheritance from his father to being in the Forbes billionaires list ?

We keyboard warriors are in NO position to speak about their dealings....

As soon as a company goes public, its actions are open to criticism from armchair analysts and keyboard/touchscreen warriors like us. Heck, you can even criticize/question them on their face at the Annual General Meeting - but it will cost you just Rs. 65 (cost of one share) to do that.

This guy went from 5 Lacs to Rs. 5,000 crores - not by making mega acquisitions, but from "organic" growth. This guy has a very high probability of becoming a millionaire (from being a billionaire) now. Meanwhile, the probability of him becoming a multi-billionaire are very slim.

[D33-PAC]

Originally Posted by smartcat

As soon as a company goes public, its actions are open to criticism from armchair analysts and keyboard/touchscreen warriors like us. Heck, you can even criticize/question them on their face at the Annual General Meeting - but it will cost you just Rs. 65 (cost of one share) to do that.

This guy went from 5 Lacs to Rs. 5,000 crores - not by making mega acquisitions, but from "organic" growth. This guy has a very high probability of becoming a millionaire (from being a billionaire) now. Meanwhile, the probability of him becoming a multi-billionaire are very slim.

Well , I don't think they became corporations of considerable size by having a stupid M.D./chairman/ceo for a leader. Their journeys and success speak volumes imho, and some of these businesses have been hit by sheer bad luck, like RIL's not finding of KGD6 gas showing tremors on GVK's quarterly reports.



As far as G.M.R/GVK is concerned, I feel totally sad for the infra guys. Surely you know that it isnt entirely their undoing that infra has been a stinker for a while.

Some of these companies are so undervalued.... Just because of bad sentiment, especially around infra. These are solid long term businesses (GMR/GVK), and frankly I dont see what is wrong with GVK, their Hancock acquisition will throw them into a different league in terms of size and future revenue.


As far as Apollo is concerned, it may or may not work well, but the Singh family has 2.2 billion reasons for the acquisition, and we, as fellow industrialists/successful entrepreneurs/ leaders of major companies surely know more than them right.... Oh wait, nevermind!

I rest my case here... happy hunting in equities!

[Drivethru]

Indian auto component companies like motherson sumi, Bharat forge and sona koyo have all done many overseas acquisitions in last few years. In OEM space too M&M, tata motors have kept buying companies with the purpose of expanding into global markets, access to technology etc. Except the JLR acquisition by Tatas most other deals are yet to see the buyers / acquirers reap any major benefits.

[lurker]

On the contrary, instead of reducing access to Indian market, they may gain more access to Indian market by selling some bideshi brand tyre in India instead of their Apollo Amazers, Hawkz, & Acceleres. Instead of maintaining position as largest OEM supplier in NAFTA or G-8 markets they will diversify into becoming largest suppliers in emerging markets seems to be what the Singhs have placed their bets upon. Time will tell.