Michelin has signed a US$439m agreement to acquire 80% of Indonesian tyre manufacturer, Multistrada Arah Sarana.

With a production capacity of more than 180,000 tons (11m passenger car, 9m two-wheel and 250,000 truck tyres), Multistrada generated net sales of US$281m in 2017.

Michelin will gradually convert production from Tier 3 passenger car tyres to Tier 2 Michelin Group brands, 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, Penta Artha Impressi in partnership with Indomobil and private investors.

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

Potential synergies in manufacturing, sales and purchasing are expected to represent up to US$70m annually within three years of the acquisition.

Multistrada, including the 20% stake in the retailer, 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.

On 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.

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