Apollo Final
Apollo Final
Apollo Final
APOLLO-COOPER ACQUISITION
SUBMITTED BY:
No Name
1. Tejas Gorasiya 2. Vivek Goti 3. Janak Jani 4. Jigar Jivani Enrollment no. 128050592033 128050592035 128050592038
128050592042
Tyres Ltd (NSE: Apollo TYRE) and Cooper Tire & Rubber Company (NYSE: CTB) today announced the execution of a definitive merger agreement under which a wholly-owned subsidiary of Apollo will acquire Cooper in an all-cash transaction valued at approximately $2.5 billion. Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Cooper stockholders will receive $35.00 per share in cash. The transaction represents a 40% premium to Coopers 30-day volume-weighted average price.
On June 14, a Friday, Apollo called a press conference at the Leela hotel in
Chanakyapuri, New Delhi. Kanwar took centre stage, making a presentation, answering questions and always looking confident. His father Onkar Kanwar, made a few statements and answered some questions but was happy to take the backseat. It was clear that the deal had also signalled a transition at Apollo.
On June 15, three days after the announcement, Che was in the US at the
invitation of Cooper, with a bid of his own to acquire the company. He bid USD 38 per share, USD 3 more than Apollo had.
Africa
About Cooper Tyres: Cooper Tyres is the ninth largest company globally with a strong
distribution network in both North America and China. It had sales of ~US$4200 mn (double the revenues of Apollo) in 2012 EBITDA margins in the range of 11-12% during the same period. 70% of revenues come from North America.25% from China and neighbouring regions (South East Asia, Australia) and remaining from Europe. 95% of the revenues come from passenger cars and light trucks predominantly replacement and this has been the primary focus area for the company. Cooper has a 14% market share in this segment in the US. Eight manufacturing plants across 3 continents with 38% of capacity in low-cost countries (China, Mexico, Serbia) Apart from North America, it also has manufacturing facilities in both China and Europe (UK, Serbia) with a total production
12, 2013.
A day after the announcement, the price of the Apollo
Tyres stock, which is traded on the National Stock Exchange of India and the Bombay Stock Exchange, dropped from the previous days close of Rs 92 to Rs 68.60 per share.
that Apollo was taking on too much debt to pay Coopernearly USD 2.5 billion.
earnings of US$215 mn in CY12 and finance costs post tax will move up by US$175 mn and there is no dilution at Apollo.
Also, Apollo will now become a global player with presence
across all the 5 continents (Americas, Europe, Africa, Asia and Australia), with the domestic business just contributing 19-20% of the consolidated revenues. However, net debt/ EBITDA and net debt/equity will significantly jump up.
Deal structure and valuation: Apollo Tyres would be making an offer of US$35 for ~63 mn shares at
Cooper Tyres which represents a 42% premium to Tuesdays close price. This along with US$300 mn of net debt and minority would
take total enterprise valuation of US$2.5 bn. Given that Coopers EBITDA
Netherlands which would be taking US$2.1 bn debt and it would be serviced by operations of these two entities.
Apollo is also taking a US$450 mn debt in a Mauritius based entity which
will be used to fund the equity contribution of the Netherlands entity; this debt would be serviced by Apollos Indian operations.
The debt will be raised via bonds in the US market which are likely to have a 7-8 year maturity, a funding cost of 10%.
The company has no intention of any equity dilution in the near future.
the first two or three years may be exceptionally tough when the synergies wont have kicked in but interest payments would have.
Cooper has over 14,000 employees across the world and Apollo has
no intention of retrenching staff at the American company. That means the combined strength of Apollo-Cooper will be 30,000.
Deal increases Apollos capacity from 26 million to 80 million a year.
Coopers dealership network and also sell Coopers passenger vehicle tyres in the Indian replacement market.
Acquisition Rationale
Game-changer for Apollo and the Industry
markets Risk diversification with multiple value levers Transaction expected to be accretive to Apollo's EPS from year one
Performa combined company:Particular Sales($mn) EBITADA ($mn) Apollo 2326 264 cooper 4201 520 combined 6527 784
215 3.49 20
0.74 1.72 16
0.02 0.02 11
1.34 1.34 7
Geographic mix
If the deal stretches beyond Dec. 31, the breakup clause does not apply.
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