CEAT to acquire Camso’s off-highway tyre biz from Michelin for ₹1,905 crore
- CEAT and Michelin entered into a definitive agreement for CEAT to acquire Camso brand's off-highway tyre business in an all-cash deal valued at about ₹1,905 crore
Tyre maker and RPG Group company CEAT announced on December 6, that it has entered into a definitive agreement with French tyremaker Michelin to acquire its Camso brand's off-highway tyres (OHT) and tracking business for $225 million (about ₹1,905 crore). The acquisition will give CEAT a global customer base, including over 40 international original equipment manufacturers (OEMs) and premium international OHT distributors.
The transaction, subject to regulatory approvals from relevant authorities, will include the business, which had revenues of around $213 million for CY 2023, global ownership of the Camso brand, and two state-of-the-art manufacturing facilities. CEAT looks to expand into higher-margin tyres at a time when elevated rubber prices have eaten into its profits.
CEAT-Michelin deal: Key Metrics
"CEAT and Michelin announce that they have entered into a definitive agreement for CEAT to acquire Camso brand's off-highway construction equipment bias tyre and tracks business from Michelin in an all-cash deal valued at about $225 million," said CEAT in a regulatory filing to the stock exchanges.
Camso, a Canadian brand that Michelin acquired in 2018 for $1.45 billion, makes tyres fitted into heavy-duty vehicles such as tractors, harvesters and bulldozers. It is a premium brand in construction equipment tyres and tracks with strong equity and market position in the EU and North American aftermarket and OE segments.
After a three-year licensing period, the Camso brand will be permanently assigned to CEAT across categories. The deal will expand CEAT's product portfolio in the high-margin OHT and tracks segments, which include agriculture tyres and tracks, harvester tyres and tracks, power sports tracks, and material handling tyres.
CEAT is the third largest Indian tyremaker by sales and competes with MRF and Apollo Tyres, among others, in the domestic market. Following the deal, CEAT said it would own two Michelin manufacturing facilities in Sri Lanka.
Commenting on the deal, Anant Goenka, Vice Chairman of RPG Enterprises, said: “This acquisition has a significant strategic consequence for CEAT as it catalyzes the company’s journey towards being a leading global tyre maker. Camso is an industry-leading brand in the Off-Highway Tyre market built through many years of investment in creating product superiority and manufacturing excellence, nurtured through the Michelin parentage."
Following the acquisition, Michelin will exit from the activities related to compact line bias tyres and construction tracks. Over the last decade, CEAT has been focusing on building its OHT business, which now consists of 900 product offerings and covers around 84 per cent of the range requirement in the agricultural segment.
Stating that access to the most premium customers, a high-quality brand and a qualified global workforce is what excites the company the most about this acquisition, CEAT Managing Director and CEO Arnab Banerjee said, "The track segment is a technologically superior segment with a limited number of global players".
According to the statement, Camso will allow CEAT to widen its product base into tracks and construction tyres and expand to other segments such as agriculture tyres. With the acquisition, both brands are said to be highly complementary in their positioning and capabilities. On Friday, shares of CEAT settled 0.18 per cent higher at ₹3,092.10 apiece on the BSE.
"Michelin firmly believes that CEAT is the right fit to carry on our bias tyres and tracks for the compact construction equipment business. Our companies are fully committed to ensuring a smooth transition for our employees and business continuity for our customers and suppliers. With this operation, Michelin continues to reshape its Beyond Road business, aligning with the Group's sustainable growth strategy," said Nour Bouhassoun, Senior Vice President, Beyond Road Business Line at Michelin.
Also Read | CEAT Q2 Results Live: Profit Falls by 41.4% YOY
CEAT Q2 Results
CEAT's consolidated profit after tax (PAT) declined 42 per cent year-on-year to ₹121 crore for the second quarter ended September 2024 due to an increase in commodity prices. The company reported a profit after tax of ₹208 crore in the July-September period of the last fiscal.
Revenue from operations rose to ₹3,304 crore for the second quarter, compared to ₹3,053 crore in the year-ago period. On a standalone basis, the company reported a PAT of ₹136.5 crore, up from ₹199 crore in the same period of the last fiscal year. The standalone revenue from operations stood at ₹3,298 crore compared to ₹3,043 crore a year ago.
"This quarter marks our highest revenue ever, driven largely by robust performances in our replacement and international sectors. While there is a significant increase in the commodity prices, our margins got impacted during the quarter," said Arnab Banerjee.
CEAT took selective price increases during the quarter that offset part of the cost impact. The revenue outlook remains positive as we enter Q3," said Banerjee. CEAT CFO Kumar Subbiah said the quarter also saw the company's overall debt level rise by ₹280 crore, driven in part by increased raw material inventory, necessitated due to an increase in transit period on imports and the distribution of dividend in September to the tune of ₹120 crore.
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Business NewsCompaniesNewsCEAT to acquire Camso’s off-highway tyre biz from Michelin for ₹1,905 crore
First Published:6 Dec 2024, 07:55 PM IST
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