Michelin is all set to acquire Camso in an attempt to strengthen its specialty business for USD 1.45 Billion. The off-road operations likely to be combined and run from Camso’s headquarters in Magog, Quebec.

United States: French tire-maker Michelin is strengthening its specialty business with a USD 1.45 Billion deal to acquire Camso, a Canadian producer of rubber tracks for farm equipment and snowmobiles. The off-road operations of both the companies are likely to be combined and run from Camso’s headquarters in Magog, Quebec. Camso makes tires for material-handling equipment and has sales of $1 billion.

According to Michelin’s Chief Financial Officer the specialty-tire market is the fastest-growing, posting growth at around 4 percent a year. The merger is being touted as a perfect fit for Michelin and Camso.

The deal is Michelin’s second acquisition for FY2018, that is worth more than USD1 Billion and aimed at diversifying the tire-manufacturing giant away from car and truck tires. The French manufacturer’s agreement in March to buy U.K.-based conveyor-belt maker Fenner Plc for about USD 1.6 Billion is expected to reinforce its presence in mining equipment.

Camso ranks among the top players in making tracks and tires for construction equipment, as per Michelin’s statement. The company, which has a manufacturing site in Sri Lanka, has grown at an average of 7 percent a year since 2012.

The deal values Camso at USD 1.7 Billion including net debt, according to the statement, which is almost 8.3 times the earnings before interest, taxes, depreciation and amortization, after synergies. Michelin is anticipating the deal to generate USD 55 Million of cost savings and increased sales by 2021.

As per Michelin’s statement, Camso’s 300-strong headquarters will remain in Quebec and the accord would likely close by the end of the year, probably by end-November.

Shareholders in Camso include Caisse des Depots et Placements du Quebec, Canada’s second-largest pension fund manager; Quebec’s Solidarity Fund QFL, which is backed by a labor union; Mouvement Desjardins, Canada’s biggest credit union; and three individuals.

According to TechSci Research, the acquisition of Camso by Michelin will enable the latter to bolster its presence in the OTR tire market. The acquisition is expected to have a positive impact on the growth of Global tire market as well as Global OTR market. The growing demand for tires from OEMs and growing tire sales in the replacement market across the globe is likely to have a positive impact on the growth of the market in the coming years. Moreover, increasing OTR vehicle sales, expanding OTR vehicle fleet size and consistently increasing OTR tire prices will ensure robust growth of the market in the coming years.

According to the recently published report by TechSci Research, “Global Tire Market By Vehicle Type (Passenger Car, Light Commercial Vehicle, Medium & Heavy Commercial Vehicle, Two-Wheeler, Three-Wheeler & OTR), By Demand Category, By Radial Vs Bias, By Region, Competition Forecast & Opportunities, 2013 – 2023” Global tire market stood at around $ 204 billion in 2017 and is projected to reach $ 304 billion by 2023, on the back of growing vehicle sales and fleet across the globe. Additionally, rising per capita income and anticipated increase in the launch of new vehicles are few of the other factors expected to drive tire sales in the coming years. Growing sales network of multinational tire companies, increasing demand for tires from OEMs and rising tire sales in the replacement market are anticipated to positively influence the global tire market during the forecast period.

According to the recently published report by TechSci Research, “Global OTR Tire Market Forecast & Opportunities, 2012-2022” Global OTR tire market stood at $19.23 billion in 2016, and is projected to exhibit a CAGR of over 8%, in value terms, to reach $ 30.40 billion by 2022, on account of increasing use of heavy machineries and equipment in agriculture, mining and industrial sectors. Moreover, on the basis of vehicle type, global OTR tire market has been majorly segmented into three categories, namely mining, construction and industrial equipment; agriculture vehicles. Few of the major companies operating in global OTR tire market are Michelin, Bridgestone, Goodyear, Yokohama, Continental, BKT, Pirelli and others.

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