JK Tyre & Industries Ltd has agreed to buy Haridwar tyre plant of BK Birla's diversified firm Kesoram Industries Ltd at an enterprise valuation of Rs 2,195 crore ($330 million), making it one of the biggest acquisitions in the domestic automotive tyre sector.
It would buy the asset along with other associate and group firms, it said during the weekend.
The deal would involve acquisition of Cavendish Industries Ltd (CIL), which houses a tyre plant at Haridwar (Laksar). The acquisition is expected to help JK Tyre, the country's
third-largest player by revenue, boost expansion in the truck and bus radials segment as well as its entry into the two- and three- wheeler tyre market.
"The acquisition is proposed to be funded, by combination of debt and internal accruals raised by JK Tyre and other JK Group entities,” JK Tyre said in a statement.
JK Tyre, however, will invest Rs 450 crore and have the largest shareholding in the acquired business and exercise substantial management control with an option to place up to 55 per cent with its associates or group companies, it added.
“The transaction is a reflection of the strength of the company in undertaking acquisitions with turnaround potential and successfully delivering results to all the stakeholders in the business," JK Tyre chairman Raghupati Singhania said.
In a separate statement, Kesoram said the transaction will strengthen the balance sheet of the company. The proceeds from the monetisation of assets are expected to be utilised to bring down its debt.
The firm had earlier indicated a valuation of Rs 2,800 crore for the plant but said this has declined since April.
It has another tyre unit at Balasore (Odisha) and remains committed to a presence in the tyre industry. Besides tyres, Kesoram Industries has a presence in the cement and rayon businesses.
The final deal is expected to be completed by December this year.
JK Tyre is among the top three automotive tyre manufacturers in India behind MRF and Apollo Tyres with presence in truck, bus, passenger cars and other vehicles. It owns six plants in India.
In 2008, JK Tyre had acquired Mexican firm Tornel for Rs 270 crore. In 1997, it had acquired Vikrant Tyres from Karnataka government.
Aurum Equity Partners LLP is acting as transaction advisor to JK Group for this deal.