New Delhi- JK Tyre & Industries Ltd., today announced the acquisition of a renowned Mexican Tyre company Tornel. The acquisition would be for 100% shareholding in the company and is being made through Special Purpose Vehicle (SPV) route. The transaction will involve an amount of approximately Rs. 2700 million and the buyout is expected to close by the end of May 2008, subject to applicable regulatory approvals. With this acquisition, JK Tyre & Industries Ltd. would substantially increase it's global foot print.

Tornel has three operating tyre plants with aggregate capacity of 6.6 million tyres per annum. Situated in Azcapotzalco, Tultitlan and Hidalgo, the 3 plants of Tornel employ 2000 people. The company is present in the entire range of Bias and Radial Tyres - from Truck, LCV, Farm and Industrial tyres in Bias category and Truck, LCV and High Speed Passenger Car tyres in Radial category.

Commenting on the acquisition, Mr. Hari Shankar Singhania, Chairman of JK Tyre & Industries Ltd., said, "JK Tyre has been outsourcing tyres for its export markets from China and Vietnam, besides its 4 manufacturing facilities in India. In line with our vision, this acquisition extends our global reach. The acquisition is also a strategic fit for JK Tyre as we are already the largest exporter to the North and South American markets".

Dr. R.P. Singhania, Vice Chairman & Managing Director, added during the conference, "We are glad that JK Tyre & Industries Ltd. continues to sustain its pace of growth and march confidently towards establishing itself as the No.1 tyre brand in India.  JK Tyre already exports its tyres to 75 countries across 6 continents. Our export turnover last year was Rs. 500 crore. This acquisition will add substantial value to our existing tyre operations and strengthen our brand positioning. Expansion in the existing as well as our imminent forays into newer markets will drive our growth".

The turnover of Tornel is USD 202 million which together with JK Tyre's turnover of Rs. 30.2 billion i.e USD 800 million will make JK Tyre a leading tyre company of India, with combined turnover exceeding USD 1 billion.  With this acquisition, the JK Tyre would be ranked 14^th if not 13^th globally.

Tornel's three plants together have a production capacity of 290 tons per day while JK Tyre at its four plants in India have a combined capacity of 650 tons per day. The combined capacity of two would thus be 940 tons per day making it India's largest four wheeler tyre company.

Tornel has a very wide distribution network of 241 distributors and 282 sales outlets. Strategic location of Mexico offers Tornel free access to the NAFTA trade block and emerging economies of Central and Southern America.  Incidentally, JK Tyre has been exporting to these markets in a big way over the years. Therefore, together both the companies would considerably strengthen the market positioning in these territories. The takeover of Tornel will also enable JK Tyre to realign its domestic capacities.

The deal is proposed to be financed through combination of Internal Accruals and debt.

Courtesy: JK Tyre & Industries Ltd, India

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Posted by Naresh Koshti on 11 April, 2008 4:33:15 PM IST #