A child bathes beside Apollo truck tyres lined up at a retail outlet in New Delhi, India, Monday, July 19 2004

Apollo Tyres is to pay $2.5bn for one of the largest US tyre makers, in the biggest Indian acquisition of a US company to date.

The all-cash purchase of Cooper Tire and Rubber is also the latest sign of the growing international focus on the car sector.

Neeraj Kanwar, managing director of Apollo Tyres, said the deal would allow his group to “derisk” amid the slowdown in its core Indian market, where car sales have declined in recent months. Cooper is the fourth-largest US tyre manufacturer by sales and has a substantial European presence.

Apollo announced on Wednesday that it would pay $35 a share in cash for Cooper, a 43 per cent premium to the closing price on Tuesday. The news sent Cooper’s shares up 40.5 per cent to $34.51. The combined company would be the seventh-largest tyre maker worldwide by sales, Apollo said, with about $6.6bn in annual sales.

Mr Kanwar said the transaction would give Apollo global scale and improve its position in US and European markets, which he added were highly profitable.

“We will be able to sell in developed markets [and] in emerging markets across the world,” Mr Kanwar said. “It really derisks the entire strategy for the company.”

Shares in Apollo sank 18 per cent on Thursday morning in Mumbai.

Jeremy Anwyl, vice-chairman of Edmunds.com, a car information site, said the transaction was an example of an increasing trend for Indian car groups to expand overseas.

“It’s showing the emergence of some of what have been historically companies focused on their national market who are now looking to be players on the global stage,” Mr Anwyl said.

The transaction is the latest in a series of international moves by Apollo, which relies on India for about two-thirds of its revenue. The company has sought to expand its overseas and export operations after the slowdown in car and truck sales hit domestic profitability. It now exports to 117 countries, and has production plants in the Netherlands, Zimbabwe and South Africa.

Apollo said it expected the transaction to produce savings of $80m to $120m annually in earnings before interest, tax, depreciation and amortisation.

“These ongoing benefits are expected to be fully achieved after three years and derived from operating scale, sourcing benefits, technology, product optimisation and manufacturing improvements,” Apollo said.

The transaction, which has the unanimous support of Cooper’s board, is expected to be completed in the second half of this year.

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