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 of Apollo Tyres said in an interview at the company’s offices in London. “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 U.S., 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.”
Possible delaysMr. Kanwar also said that given the political instability in South Korea, he expected there could be delays in the process.
If the Gurgaon-based tyre maker does go ahead, it would be the first major acquisition attempt by Apollo Tyres since its failed bid for U.S.-based Cooper Tire, which collapsed because of the reservations of the joint venture partner in China. Mr. 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.”
A successful acquisition would widen Apollo Tyres’ international footprint, giving the company a foothold in South Korea as well as in the car, truck and SUV sectors in the U.S., a market it has long planned to expand into.
Mr. Kanwar said that independent of the bid, the company had plans to grow its business in the U.S. — focusing on expanding the portfolio of products it offered, with a view to setting up a manufacturing facility in the long term.
Largest market“It’s the largest market in the world for car and truck tires and different demographics in terms of products for us but it becomes very lucrative for us to create a brand there. 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 currently accounts for 60 per cent of its portfolio, Mr. Kanwar aims to gradually raise the share from international operations with Europe, targeted to account for about 50 per cent next year once Apollo’s new factory in Hungary becomes operational.
Vredestein brand“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, referring to the Dutch tyre maker Apollo acquired in 2009.
Apollo remains optimistic about market sentiment in Europe, despite Brexit, driven by driven by growth in demand for its premium and specialist tyres in its main market, Germany.
‘Too early’“Coming to the U.K., 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 U.K. so it could have an impact but it’s too early to say.”
The U.K. accounts for about 5 percent of Apollo’s European business portfolio by volume.
