Michelin buying Indonesian tire maker

Clermont-Ferrand, France — Michelin is buying 80% control of Indonesia's PT Multistrada Ara Sarana Tbk., producer and marketer of the Achilles and Corsa tire brands as well as a number of private brands.

In a 22 Jan statement, Michelin said it will pay $439 million (€386 million) to acquire 80% of Multistrada shares, held by an investor group.

The deal is subject to certain closing adjustments.

As Multistrada is a publicly-listed company, Michelin is planning to launch a public offer after closing the deal, for the remaining outstanding shares at the same price it's offering the investor group.

Multistrada reported sales of $281 million in fiscal 2017, making it the 62nd largest tire maker worldwide, according to ERJ’s annual Global Top 75 ranking.

The 25-year-old company operates an annual production capacity of more than 180 kilotonnes per annum (ktpa).

The company manufactures 11 million passenger car tires, 9 million two-wheeler tires and 250,000 truck tires per year.

Michelin said the transaction would help it strengthen its presence in the "highly promising but local-production-dominated" Indonesian market.

The company said it will be obtaining “a competitive local plant” with quality facilities and immediately available production capacity.

Michelin said it will convert production gradually to Tier 2 Michelin Group brands from the company's existing Tier 3 passenger tire brands.

This will allow more Tier 1 production at its other Asian plants and supporting growth of demand of Tier 2 volumes in Europe, North America and Asia.

The acquisition will be funded from internal financial resources and is not expected to have an impact on Michelin's ratings.

This will be Michelin's seventh tire plant in Asia/Pacific, joining those in: China (two plants), India and Thailand (three plants).

Michelin also owns a 10% stake in Indonesia's PT Gajah Tunggal, from which it sources tires.

Multistrada was founded as PT Oroban Perkasa in 1988 and initially used technology purchased from Pirelli Tyre and later from Continental AG.

Majority control was purchased in 2004 by a pair of local investors, PVP XVIII Pte. Ltd and PT Indokemika Jayatama, which then took the company public.

Michelin is also 55% owner of PT Synthetic Rubber Indonesia (PTSRI), a 120ktpa synthetic rubber joint venture with PT Chandra Asri Petrochemical Tbk, which started production late last year.