loader2
NRI

Open DEMAT AND TRADING ACCOUNT WITH ICICIDIRECT

  • 09 Dec 2024
  • ICICI Securities

ANNOUNCES ACQUISITION OF CONSTRUCTION EQUIPMENT TYRE AND TRACKS BUSINESS

News: In a press release, CEAT, a leading Indian tyre manufacturer, has entered into a definitive agreement to acquire the Camso brand's Off-Highway construction equipment bias tyre and tracks business from Michelin for US$225 million (~₹ 1,900 crore). This all-cash transaction includes two manufacturing facilities located in Sri Lanka and grants CEAT global ownership of the Camso brand after an initial three-year licensing period. This acquisition will also provide access to over 40 international original equipment manufacturers (OEMs) and premium distributors, further solidifying CEAT's position in the global OHT market, particularly in Europe and North America. The deal is expected to be completed within 6-9 months, pending regulatory approvals.

Views: Over the past few years, CEAT has strategically focused on developing its Off-Highway Tyres (OHT) business, which now boasts over 900 product offerings and meets approximately 84% of the agricultural segment's range requirements. The acquisition of the Camso brand's Off-Highway construction equipment bias tyres and tracks business from Michelin, valued at $225 million, presents CEAT with a unique opportunity to expand its product portfolio into bias tracks and construction tyres. The transaction includes the business with revenues of $213 Mn (~₹ 1,800 crore) in CY23 along with two manufacturing facilities (located in Sri Lanks) and global ownership of the Camso brand, after an initial 3-year licencing period. The target is being acquired at a valuation of ~1x P/S and is expected to be margin and earnings accretive for the company. It is a sizeable acquisition for the company with debt on B/S slated to nearly double initially however well within the comfortable range of ~2x Debt/EBITDA & ~1x Debt: Equity. 

Impact: Positive