Tornel Takeover to Give JK 15.3 Million Unit Capacity
The 100 per cent acquisition of Mexico’s Tornel by JK Tyre, announced on April 11, sees the Indian tyre manufacturer become the country’s fourth-largest. The £34.19 million acquisition, which is expected to close by the end of May, will be funded through a special purpose vehicle (SPV) – a company created solely for this particular transaction – based in Mexico.
“We will raise the money through internal accruals and debt, which will be structured though a SPV,” commented JK Tyres & Industries’ vice-chairman & managing director Raghupati Singhania. “Tornel will be a fully-owned subsidiary of JK Tyres and there will be no dilution of the existing shareholding in the company. We shall also bring a rights issue in the next few months, which will be in the ratio of 3:1, to help bridge the funds for the acquisition. The price of the issue will be determined at the time of offer.”
Last year Tornel’s annual turnover was around Rs 8 billion (£101.7 million), while JK Tyres’ turnover was more than Rs 32 billion (£407 million) in the previous fiscal year. The Mexican based company operates three facilities, with a total capacity of 6.6 million units or 290 tonnes per day, and has a network of 241 distributors and 282 sales outlets. Employing 2,000 people, the company produces passenger car, light commercial and truck tyres. JK Tyres plans to continue the Tornel brand alongside its own products following the acquisition. ”There will be re-alignment in our capacity,” said Raghupati. “And with the additional capacity available for the domestic market, we would be able to participate more in the domestic market.”
Following the takeover JK Tyres will have a total annual capacity of 15.3 million tyres, however the company plans to expand its OTR tyre capacity in India even further.