Yokohama Rubber to buy Alliance Tire Group from KKR for $1.2 bln

Image: Prasad Gori for Forbes India

ATG's Yogesh Mahansaria

The Yokohama Rubber Co., Ltd. on Friday said it has reached an agreement with global investment firm KKR and other concerned parties to purchase all of the shares of Alliance Tire Group (ATG) as part of Yokohama Rubber's plans to expand its commercial tire business. The agreed equity value of the transaction is about $1.2 billion ($1,179 million to be precise). The acquisition is expected to be finalized on July 1, 2016, after completion of all necessary closing procedures, including regulatory approvals, KKR said in a statement.

ATG has developed a highly specialized business in the manufacture and sale of tyres for agricultural, industrial, construction and forestry machinery. ATG sells radial and bias tyres for the aforementioned types of vehicles in 120 countries around the world, with a focus on the North American and European markets.

Yokohama Rubber does not currently manufacture or sell tyres for agricultural or forestry machinery. The acquisition of ATG will strengthen Yokohama Rubber’s product lineup in commercial tires.

Agricultural equipment tyre demand is expected to increase as a result of the growing use of agricultural machinery, which is crucial to improve agricultural efficiency to meet the increasing food needs for the world’s growing population.

Yokohama Rubber is currently in Phase IV (2015–2017) of its Grand Design 100 (GD100) medium-term management plan. This plan has established the expansion of the business in commercial tyres as a new core pillar of Yokohama Rubber’s tire business strategy, and the company is accordingly devoting considerable resources to developing and expanding sales of ultra-large radial tires for mining and construction equipment. Also, Yokohama Rubber recently started production of truck and bus tyres at a new plant in the US state of Mississippi, and it plans to continue promoting local production for local consumption. The ATG acquisition will strengthen the Yokohama Group’s business in commercial tires and accelerate its ongoing globalization.

ATG, which has 2 plants in India and 1 plant in Israel, was established in November, 2006 and had annual sales of $529 million and operating profit of $95million for FY2015.