INLSA
An aerial view of Apollo Tyres Ladysmith plant, which has been sold together with its Dunlop retail network and brand rights in Africa to Japans Sumitomo Rubber Industries in a R600m deal.
India’s Apollo Tyres has sold part of its South African business, including its Ladysmith passenger car tyre plant and Dunlop brand rights in Africa, to Japan’s Sumitomo Rubber Industries in a $60 million (R600m) deal.
The transaction, announced last week, excludes the Durban manufacturing hub of Apollo Tyres based in Sydney Road.
It comes seven years after the Mumbai Stock Exchange-listed group acquired Durban-headquartered Dunlop Tyres International in a R382m deal.
The deal included Dunlop’s Durban and Ladysmith plants in addition to its extensive retail footprint. Dunlop Tyres was renamed Apollo Tyres South Africa, but the company continued to manufacture the Dunlop brand and introduced its Apollo and Vredestein brands to the country.
Commenting on the latest deal, Onkar Kanwar, chairman of Apollo Tyres Ltd, said the “partnership” with Sumitomo Rubber Industries (SRI) was a “win-win situation” for all.
“SRI gets a manufacturing location on the continent and control over the Dunlop brand which they also use in many other countries. Apollo retains one plant in South Africa and has the ability to develop further the markets for its global brands – Apollo and Vredestein,” he said.
Kanwar said the transaction would see Sumitomo Rubber Industries take over Apollo Tyres South Africa, including the Ladysmith passenger car tyre plant. Apollo Tyres would retain the Durban plant which made truck and bus radial tyres and “off highway” tyres used in the mining and construction industries.
“For a consideration of $60m, SRI will acquire Apollo Tyres South Africa, including the Ladysmith plant. All employees of the company, other than those in the Durban plant, will continue with Apollo Tyres South Africa… It may be noted that the two entities have made sure that there are no jobs lost.”
Kanwar added: “While we have two global brands – Apollo and Vredestein – which we are looking at expanding across the world, we had the brand rights for selling the Dunlop brand only in 32 countries of Africa. We have retained the manufacturing facility in Durban, as we would like to increase the presence of Apollo and Vredestein branded tyres in Africa, which we have already been selling in South Africa for the past few years.”
Sumitomo Rubber Industries reportedly already owns the Dunlop rights in 20 African countries. The Japanese industrial giant, together with its global alliance partner Goodyear Tyre and Rubber Company, jointly owns the Dunlop brand in most markets globally. Meanwhile, Apollo Tyres hinted at reinvesting some of the funds from the sale of the Ladysmith plant and Dunlop distribution network into expanding in South Africa and the rest of Africa.
“Apollo Tyres will continue to sell the Apollo, Vredestein and Regal brand tyres in Africa while focusing on creating and strengthening its own sales and distribution network across the continent. Both companies will also undertake contract manufacturing of their respective brands at each other’s facility to have locally manufactured products available for the market.”
Since 2010 Apollo Tyres has invested about R300m in new equipment and technology for the Ladysmith plant.
According to Apollo Tyres South Africa, the Durban plant produces more than 400 000 truck and bus radial tyres a year, while the Ladysmith plant makes around 3.5 million passenger vehicle tyres annually.
The Durban plant also produces specialised tyres for the mining and construction industry. The company employs about 1 700 people in South Africa, with more than 600 employed in Durban. The rest are employed in the Ladysmith plant and in its extensive service and distribution network.
Apollo Tyres said it would now focus on extending the reach of its global brands, Apollo and Vredestein, in Africa.
“If this calls for investment, the company will not shy away from that,” it said in response to questions from The Mercury.
“While the Durban plant will remain with Apollo Tyres Ltd, the company has three to four months to form a new entity,” it added. – The Mercury
