Buyout firms chase Warburg’s Alliance Tire stake - report
Private equity investors are said to be eying Alliance Tire Group after Warburg Pincus put a 70% stake in the Indian tire manufacturer on the block. Should the transaction go through, the price is likely to exceed $500 million, making it one of India’s largest ever PE deals.
According to the Financial Times, bidders include Advent International, The Blackstone Group, KKR and Temasek Holdings. Bain Capital and The Carlyle Group, meanwhile, dropped out as the asking price rose. The first round of the auction is now complete and a sale could be agreed within weeks.
Alliance was founded in Israel in 1950, filed for bankruptcy protection in the late 1980s and was acquired by a consortium including Bear Stearns in 1992, and went public in Tel Aviv the following year. Warburg Pincus and Yogesh Mahansaria, former CEO of India's Balkrishna Tyres, bought the company for $150 million in 2007. The private equity firm took a 70% stake with the Mahansaria family holding the remainder.
Alliance acquired global rights to the Galaxy and Primex brands from GPX International in 2009 after the US company filed for bankruptcy. Like Alliance, Galaxy and Primex specialize in the agricultural and off-road tires. This market is estimated to be worth $12 billion per year, compared to $150 billion for the car tire market.
Following the Warburg Pincus buyout, Alliance added a greenfield plant in southern India to existing operation in Israel. It also has contract tire manufacturing facilities in China and Taiwan, and R&D centers in Israel, the US, India and South Africa.
The company has seen its revenue reach $500 million, up from $125 million six years ago. Exports account for 90% of Alliance's output, with customers in more than 120 countries.
Bain Capital was responsible for India's largest private equity deals in the last couple of years, investing $851 million in Hero Honda and $1 billion in Genpact, both minority investments. The leading control transaction came in 2006 when KKR and Sequoia Capital acquired Flectronics Software Systems for $900 million.
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