Michelin buying majority stake in Indonesia tyre maker; speeds up its entry to SEA

Michelin-tyreFrench tyre maker Michelin is acquiring a majority stake in Indonesian compatriot PT Multistrada Ara Sarana Tbk, which makes the Achilles and Corsa tyre brands. Michelin plans to take an 80% stake in the company for US$439 million held by an investor group, subject to certain closing adjustments, and will launch a public offer thereafter for the remaining outstanding shares at the same price it’s offering the investor group. Multistrada is publicly traded and belongs to conglomerate Salim Group.

Michelin says it will gain a “local plant with good quality facilities” and “immediately available” annual production capacity broken out as follows:

* 11 million passenger tyres;

* 9 million two-wheel tyres; and

* 250,000 truck tyres

Michelin will gradually convert production from Tier 3 passenger car tyres to Tier 2 Groupe Michelin brands, thereby allowing more Tier 1 production at other Asian plants and supporting growth of demand of Tier 2 volumes in Europe, North America and Asia.

As part of the transaction, Michelin also will acquire a 20% stake in tyre retailer PT Penta Artha Impressi in partnership with Indomobil and private investors, which will boost the marketing and sales of Groupe Michelin brands in Indonesia. Michelin says this will help the company “secure significant access to a major market and be well placed to benefit from the market’s future growth and expansion.”

Founded in 1988, Multistrada had a production capacity of more than 180,000 tonnes in 2017 and generated sales of US$281 million.

Michelin expects to reap synergies of US$70 million annually within three years of completing the purchase, in such areas as production, sales and purchasing.

With a population exceeding 250 million, Indonesia is Southeast Asia’s largest market for new automotive vehicles with sales hitting 1 million units in 2018. It is second in the region after Thailand in production volume.

Michelin CEO Jean-Dominique Senard said in a statement, “The acquisition of Multistrada represents an excellent opportunity for Michelin to expand its operations in Indonesia, the most populous country in Southeast Asia, and immediately gain competitive, good-quality production capacity without having to create any new manufacturing facilities.”

Multistrada has been a sponsor of popular French soccer team Paris Saint-Germain since 2016.

As Multistrada is a publicly listed company, and pursuant to Indonesian regulations, Michelin subsequently will launch a public offer for the remaining outstanding shares, at the same price per share as that offered to the 80% shareholder group. Michelin says the acquisition will be funded from internal financial resources and is not expected to have an impact on Michelin’s ratings.