Michelin Buys-out Apollo
Michelin has bought Apollo Tyres’ stake in the two companies’ joint venture. In addition to the 49 per cent stake Michelin now owns as a result of the acquisition, the French manufacturer will hold onto the 14.9 per cent stake it acquired in Apollo Tyres two years ago. Explaining the reason behind the buy-out, Michelin said: “While the use of radial tyres has gone up in the past two years, it is at a pace that was slower than projected by the partners.”
Apollo Tyres’ official statement approaches the story from a slightly different angle. According to the Indian manufacturer, “Apollo Tyres Ltd and the Michelin Group have mutually agreed to postpone their joint industrial project located in Ranjangaon, Pune, by at least one year.”
This joint venture company called Michelin Apollo Tyres Pvt Ltd or MAT was set up to manufacture truck and bus radial tyres for the domestic market. Apollo supported Michelin’s line that the decision is based on difficult market conditions, adding that the partners have “decided to refocus their respective resources towards more immediate projects.” The Ranjangaon project will be undertaken solely by the Michelin Group. In the meantime the partners will continue to explore opportunities for co-operation in India, Apollo’s statement concluded.
But what about the cost? Officially the companies have not disclosed details of how much Michelin paid for Apollo’s 49 per cent share of the joint venture. However Indian newspaper reports suggest it is around $10 million. This piece of deduction is derived from the fact that Apollo Board Member, Sunam Sarkar, told the Hindu Business Line the company “will get almost the entire amount invested in the joint venture company.” “We have neither lost or gained in financial terms, Mr Sarkar added.
So how will the company proceed from here? “We will evolve a strategy for the truck and bus radial segment in the coming days. Our exit from the joint venture does not mean that we have had a setback or would not foray into truck and bus radial manufacturing in the future, Sunam Sarkar told the Indian business newspaper.