Michelin to acquire farm-tyre maker Camso for US$1.45b

[PARIS]French tyre-maker Michelin is bolstering its specialty business with a US$1.45 billion deal to buy Camso, a Canadian producer of rubber tracks for farm equipment and snowmobiles.

The two companies' off-road operations will be combined and run from Camso's headquarters in Magog, Quebec, Michelin said in a statement Thursday. Closely held Camso, which also makes tires for material-handling equipment, has sales of US$1 billion.

"The specialty-tire market is by far the fastest-growing," Michelin Chief Financial Officer Marc Henry told reporters by phone, putting growth at around 4 per cent a year. "This merger is a perfect fit for Michelin and Camso."

Michelin shares rose as much as 2.5 per cent after the news.

The deal is Michelin's second acquisition this year worth more than US$1 billion and aimed at diversifying the Clermont Ferrand, France-based company away from car and truck tyres. The French manufacturer's agreement in March to buy UK-based conveyor-belt maker Fenner Plc for about £1.2 billion (S$2.16 billion) will strengthen its presence in mining equipment.

Camso ranks among the top three companies in making tracks and tires for construction equipment, Michelin said. The company, which has a manufacturing site in Sri Lanka, has grown at an average of 7 per cent a year since 2012.

The deal values Camso at US$1.7 billion including net debt, according to the statement, which equals 8.3 times earnings before interest, taxes, depreciation and amortization, after synergies. Michelin forecasts the deal will generate US$55 million of cost savings and increased sales by 2021.

The French company agreed to keep Camso's 300-strong headquarters in Quebec, and doesn't see major job cuts in France as a result, Henry said. The accord would likely close by the end of the year, probably by end-November, he said.

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.

Michelin also said Thursday it has doubled its estimate of synergies from the Fenner acquisition to £60 million.

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