JK to buy Kesoram Industries' tyre unit for 2,200 cr

HYDERABAD: JK Tyre & Industries Limited (JK Tyre) and its subsidiary JK Asia Pacific Singapore Pte Limited on Saturday announced that they have signed a binding termsheet with Kesoram Industries Limited (KIL) to acquire 100% equity in Cavendish Industries Limited (CIL) for Rs 2,200 crore. CIL houses a tyre business undertaking in Haridwar that manufactures a range of tyres, tubes and flaps.
"JK Group has agreed for this acquisition at an enterprise value not exceeding Rs 2,200 crore, subject to conditions, wherein JK Tyre will hold the largest shareholding block and shall have substantial management control of CIL with an option to place up to 55% with its associates/group companies," JK Tyre said in a statement.
According to JK Tyre, the acquisition is proposed to be funded by a combination of debt and internal accruals and the financial exposure of JK Tyre in the acquisition is expected to be Rs 450 crore. Commenting on the deal, Raghupati Singhania, chairman, JK Tyre, said, "The transaction is a reflection of the inherent strength of the company in undertaking acquisitions with turnaround potential and successfully delivering results to all the stakeholders in the business. This was recently evidenced by a similar success story in JK Tyre's acquisition of Tornel, Mexico."
The acquisition will provide JK Tyre with additional capacity for ready expansion in the truck and bus radials segment, where it is a market leader, as well as entry into the fast growing two and three-wheeler tyre market. Aurum Equity Partners LLP were advisors to JK Group for this deal.