French tyre maker Michelin says it is buying Canadian firm Camso for US$1.45 billion to generate US$55 million of cost savings and increased sales by 2021.
Camso, which averages net sales of US$1 billion, designs and manufactures off-the-road (OTR) material such as rubber tracks for farm equipment and snowmobiles as well as tyres for material handling equipment. Michelin said its acquisition would create a world leader in the OTR sector.
The two companies’ OTR products will be combined and run from Camso’s headquarters in Magog, Quebec.
“Michelin will benefit from all of Camso’s skills in the off-the-road mobility markets and Camso from the full range of Michelin’s expertise in the specialty markets,” said Michelin Chief Executive Jean-Dominique Senard in a statement.
“The speciality-tyre market is by far the fastest growing,” Michelin Chief Financial Officer Marc Henry said, putting growth at around 4% a year. “This merger is a perfect fit for Michelin and Camso,” he added.
The deal is Michelin’s second acquisition this year worth more than US$1 billion that is aimed at diversifying the France-based company away from car and truck tyres. In March this year, Michelin agreed to buy UK-based conveyor-belt maker Fenner for about US$1.6 billion, to strengthen its presence in mining equipment. Michelin also said it has doubled its estimate of synergies from the Fenner acquisition to US$79 million from US$30 million.
Camso ranks among the top three companies in making tracks and tyres for construction equipment, Michelin said. The company, which has a manufacturing site in Sri Lanka, has grown at an average of 7% a year since 2012.
The deal values Camso at US$1.7 billion including net debt, according to the statement, which equals 8.3 times earnings before interest, taxes, depreciation and amortization, after synergies.
The French company agreed to keep Camso’s 300-strong headquarters in Quebec and doesn’t see major job cuts in France as a result, Henry said. The deal will likely close by the end of the year, probably by the end of November, said Henry.
Shareholders in Camso include Caisse des Depots et Placements du Quebec, Canada’s second-largest pension fund manager; Quebec’s Solidarity Fund QFL, which is backed by a labour union; Mouvement Desjardins, Canada’s biggest credit union; and three individuals.