Acquisition of Cooper Tire – Ambitious move
Apollo Tyres (APTY) and Cooper Tire and Rubber Company (CTB) have announced a definitive merger agreement, under which APTY will acquire CTB in an all cash transaction valuing the firm at US$2.5bn (including minority interest). APTY will acquire 100% equity of CTB for an equity valuation of US$2.2bn, ie at a 43% premium to CTB’s 30 day volume weighted average price. The acquisition would be funded entirely through debt. The deal value of US$2.5bn translates into an implied EV/EBITDA multiple of 4.4x (TTM basis), which is broadly in-line with the global average. Post the acquisition, the combined entity will be the 7th largest tyre company in the world with combined revenues of US$6.6bn. The company expects to close the transaction in the next four months.
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