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Yokohama on the ATG acquisition

Through its acquisition of Alliance Tire Group, Yokohama expects to achieve huge cost reductions via optimization of procurement, which will be done jointly; expansion of sales networks; an improvement in production efficiency; and a reduction in logistics costs

 

Yokohama Rubber Corporation (YRC) is to acquire Alliance Tire Group (ATG) in order to strengthen its portfolio and increase its sales. The company had been considering a merger in the commercial tire business for several years.

“YRC recognized that it needs to strengthen its commercial tire business, including truck and bus rubber, tires for construction vehicles, industrial machinery and agricultural machinery,” said a Yokohama spokesperson.

“Particularly, the demand for agricultural machinery is expected to grow, driven by the global population growth and food demand increase. The agricultural tire market is one of the most promising growth markets.”

YRC regards the agricultural tire market as one which has not suffered by economic downturn compared with the other commercial tire sectors. “This is also an attractive market for us to enjoy higher profitability compared with the general commercial tire market,” the spokesperson added.

Currently, YRC does not manufacture agricultural tires and as a newcomer to the market, decided to focus more on speed and efficiency rather than developing business from scratch.

“There are several global top-class tire manufacturers that produce agricultural tires and industrial tires as well as automobile tires, including Michelin and Bridgestone. Various commercial tire makers were examined with ATG selected as the final candidate.”

YRC began full-scale internal consideration on the acquisition last September, and started concrete discussions with KKR last November. An MOU with sellers was concluded at the end of December 2015 with the share purchase agreement mutually signed in March.

The agreed equity value of the transaction is US$1.179bn (approximately ¥136bn) and the acquisition is expected to be finalized on July 1, 2016.

Through the acquisition YRC expects cost reductions through optimization of procurement, which will be done jointly; expansion of sales networks; an improvement in production efficiency; and reduction in logistics costs. YRC is aiming for US$15m annual synergies (in operating profit) in a timescale of three years after the acquisition.

April 28, 2016

 

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