Michelin has announced it has signed an agreement to acquire 80% of PT Multistrada Arah Sarana (“Multistrada”), a tyre manufacturer based in Indonesia. With a production capacity of more than 180,000 tons (ie, 11m passenger car tyres, 9m two-wheel tyres and 250,000 truck tyres), Multistrada generated net sales of US$281m in 2017. With this transaction, Michelin will strengthen its presence in the highly promising but local-production dominated Indonesian market by acquiring a very competitive local plant with good quality facilities and immediately available production capacity. Leveraging its technical expertise with limited new investment, Michelin will gradually convert production from Tier 3 passenger car tyres to Tier 2 Michelin Group 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.
In addition, through the transaction Michelin will acquire a 20% stake in the retailer PT Penta Artha Impressi (“Penta”) in partnership with Indomobil and private investors, which will boost the marketing and sales of Michelin Group brands in Indonesia allowing Michelin to secure significant access to a major market and be well placed to benefit from the market’s future growth and expansion.
Jean-Dominique Senard, chief executive officer of the Michelin Group, said: “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.”
Pieter Tanuri, chief executive officer of Multistrada, said: “we are very proud of what we achieved with Multistrada and we are confident Michelin is the ideal partner to take Multistrada forward into a new era of growth and success for the benefit of all stakeholders and employees.”
Potential synergies in manufacturing, sales and purchasing are expected to represent up to US$70m per year within 3 years of the acquisition. Multistrada, including the 20% stake in the retailer PT Penta and 50 hectares of available land, has been valued at US$700m enterprise value, representing 6.3 times EBITDA for the 12 months ended 30 September 2018, after expected synergies.
Upon closing, Michelin will pay US$439m for 80% of the Multistrada shares subject to certain closing adjustments. As Multistrada is a publicly listed company, and pursuant to Indonesian regulations, Michelin will subsequently launch a public offer for the remaining outstanding shares, at the same price per share as that offered to the 80% shareholder group. The acquisition will be funded from internal financial resources and is not expected to have an impact on Michelin’s ratings.