Long way to go on non-binding Kumho Tire bid: Apollo Tyres

Apollo Tyres has made a non-binding bid for Kumho Tire, though the company was yet to determine if the South Korean tyre manufacturer was the right fit.

“We have made a non-binding bid that has been taken to the board. We made the non-binding bid to get into the process,” Neeraj Kanwar, Managing Director, Apollo Tyres, told BusinessLine in an interview at the company’s offices in London.

“We still don’t have much material on it - we still don’t know the specifics: we know it is a good brand across the world, specifically in Asia, and that they have invested heavily in the US, which is a good market to be in. There is a long way to get into the data and to see if it’s a good fit for us.”

Given the political instability in South Korea, he expected there to be delays in the process.

If it does go ahead it would be the first major acquisition by Apollo Tyres since its failed bid for the US-based Cooper Tire, which collapsed because of the reservations of the joint venture partner in China.

Kanwar said the company had learnt its lessons: “If and when I do go into this deal…a very microscopic level of diligence has to be done, given that they are in countries in which we don’t operate.”

The acquisition would help advance Apollo Tyres’ international expansion strategy, giving the company a foothold in South Korea as well as in the US car, truck and SUV sectors, a market in which it has long planned to expand into.

Kanwar said that independent of the bid, the company had plans to grow its business in the US - focusing on expanding the portfolio of products it offered, with a view to setting up a manufacturing facility in the long term. “Eventually if America picks up for us — you go above revenues of $100 million — you should see a near manufacturing facility coming up because freight is expensive.”

While India accounts for 60 per cent of portfolio, Kanwar hopes that international operations will gradually represent an increasing share with Europe, accounting for around 50 per cent next year once its new factory in Hungary becomes operational.

“Next year, we will hopefully see double digit growth in terms of volumes,” he said of the company’s growth prospects in Europe and India. “Between 2017 and 2020 a lot of top cars will have Vredestein brand tyres in Europe,” he said of the Dutch tyre maker, it acquired in 2009.

Kanwar remains optimistic about market sentiment in Europe, despite Brexit, driven by growth in demand for its premium and specialist tyres in its main market, Germany.

“Coming to the UK, yes it’s a dampener but we don’t manufacture here so it doesn’t have a huge impact. Of course, we do import tyres to the UK so it could have an impact but it’s too early to say.”

COMMENT NOW