Apollo to buy Cooper Tires for US$2.5Billion.
The tyre industry has undergone a number of strategic changes in recent times, none more so than the recent acquisition of Cooper Tyres by fellow manufacturer Apollo.
After months of speculation, Apollo Tyres are buying Cooper Tyres. The Indian based company have set an agreed US$2.5Billion to make it the seventh largest Tyre manufacturer in the world. With this sale Apollo now have access to the Northern and Southern American markets. With rumours of the sale circling around for a while it was no real surprise that they sealed the deal but the timing has been questioned by many, based on how quick the sale had gone through. The main concern is that when a smaller firm, such as Apollo, buys out a bigger firm (in this case, Cooper), Apollo may be biting off more than it can chew and the after affects of this could be felt quite a way down the line.
However, other companies are welcoming the change. With both companies now selling in new market areas such as North America and helping each other grow. Apollo Tyres now stand as the seventh largest tyre company within the industry with a turnover of £4.35billion. Even though Apollo are very well respected in India, the smaller subsidiaries such as Cooper, Vredestein and Mastercraft are not yet suited for such a high market priced segment.
None of this has spoilt the news for Apollo Tyres with the leader of the deal Onkar S Kanwar, chairman of Apollo Tyres stating, “ This transformational transaction provides an unprecedented opportunity to serve customers across a host of geographies in both developed and fast growing emerging markets around the world. Cooper is one of the most respected names in the tyre industry, with an extensive distribution network and manufacturing infrastructure, and a particularly robust presence in North America and China. The Combined company will be uniquely positioned to address large, established markets, such as the United States and the European Union, as well as the fast-growing markets of India, China, Africa and Latin America where there is a significant potential for further growth. Our combined portfolio of brands and products will be amongst the most comprehensive in the industry.”
So how is Apollo going to keep everyone happy with the all the new brands? A Tri-brand strategy is going to be put in place with Apollo, Vresdesteinand Cooper all targeting different markets. Vresdestein will be targeting tier one, high performance market keeping it as it is at the moment; with Cooper tyres focusing on the high tier two level while also being priced differentiated from Apollo, which will be some what in-between the two. With such a range of global markets now between all three manufacturers it means they can target specific markets with their own specific niches. The biggest issue is how is the smaller Apollo going to cope with running three brands. Look at the likes of Volkswagen and Skoda. With the likes of Bugatti, sitting high up in the order, VW, Audi in-between with Skoda just behind it shows that it can be done. It wouldn’t be the first time someone has strategically bought out another tyre company: Michelin successfully own six smaller companies as well as its main brand.
Ever since the change the stocks for each company have taken a turn.
Cooper Tyres Shares
Apollo Tyres Shares
Source: Wheelwright Blog