Warburg Pincus acquired control of Alliance Tire from Fishman Holdings at a company value of $50 million in 2007.
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KKR (L-R) Founders George Roberts and Henry Kravis
/ By Clive Minchom /
It was announced on Thursday that $75 billion private equity investment firm KKR & Co L.P. (KKR) is acquiring control of the Alliance Tire Group (ATG) from controlling shareholders Warburg Pincus LLC (Warburg Pincus), a $30 billion private equity firm, both entities being based in New York but both also having a global presence.
The price has not been disclosed but has been variously reported as $300 million or even larger – perhaps as much as $500 million – so in any case it counts as a significant transaction. As such it may be the second largest in India for some time in private equity deals – the banner header still being the Bain Capital deal to pay about $1 billion to buy a 30 percent stake in business process and technology services provider Genpact in August 2012.
Warburg Pincus had previously purchased 100% of the company in 2007 from Israel’s Fishman Holdings, owned by Eliezer Fishman, for $48 million, together with the Mahansaria family of Mumbai in India who took then reportedly a 25% interest, with financial partner Warburg Pincus reportedly then taking the balance of 75%. Based even on the lower reported sale price therefore Warburg Pincus can count this as a very successful exit.
With Rogesh Mahansaria taking charge as CEO in 2007, he has since built the company both organically, with a strong emphasis on R&D, and also through acquisition to its present success. Rogesh and the Mahansaria family will retain its significant, though undisclosed holding, under the new arrangements with KKR and it seems they will together continue to grow the company. It is also reported that the KKR holding “may” ultimately increase to 90%.
“We would be delighted to have KKR as our new incoming partner. Our team is impressed by KKR’s franchise and its strong track record. KKR’s investment will enable us to continue to expand into new markets, make strategic acquisitions, and help scale our global presence” said Mr. Mahansaria.” “We would also like to thank Warburg Pincus for its support during the past six years as it helped create and build ATG into the global industry leader that it is today.”
“ATG is a leader in an attractive industry with strong underlying growth drivers. We are thrilled to be partnered with Yogesh and his management team and look forward to leveraging our global network to support their continued growth, ” said Sanjay Nayar, Member of KKR and Head of KKR India.”From funding the initial acquisition of Israel-based Alliance Tire Company to the development of a global player in the off-highway tire sector, our partnership with Yogesh and the entire ATG management team has been an extremely successful one. We are confident that ATG’s success will continue with its new partners, ” said Vishal Mahadevia, Managing Director and Co-Head of Warburg Pincus India.
ATG is a niche player in the enormous global tyre industry, making tyres primarily for use in off-road vehicles such as tractors, graders and haulers for use in harsh agricultural, forestry, mining or construction environments. With factories in Israel and India ATG has successfully built up a world wide presence in over 120 countries. Today ATBG employs more than 2, 500 people worldwide, and has R&D facilities in Israel, India, the United States and South Africa. The Company’s products sell under the brand names Alliance, Galaxy and Primex. The Galaxy and Primex brands were both acquired in 2009.
Alliance was founded in Israel in 1950. In the early 60s, the company started to manufacture front and rear diagonal tractor tires and in the early 80s, Alliance designed and manufactured its first radial tractor series of tires. Alliance has been consistently investing in R&D since its inception. The company has made it a point to constantly upgrade its production technology to support latest developments. Alliance has followed the path of application-based product development, which has helped it in growing as a company: quite simply understanding and then providing the best products to meet the specific needs of its customers in each of the markets in which it participates.
The company owns 2 manufacturing plants, one in Hadera at Israel and the other in Tirunelveli, southern India. Apart from its own plants, ATG’s tires are also manufactured at dedicated contract manufacturing facilities in China and Taiwan. These products are made according to the strict quality standards that are applied to all ATG products.
After the Warburg Pincus acquisition in 2007 the centre of gravity of the company moved to India. During the recent global recession Alliance Tire actually closed part of its Israeli operations and fired a number of employees making some of the company’s more basic products. Alliance Tire chairman Israel (Isia) Tchetchik said at the time “The manufacture of simple tires will go to India because we can’t compete on price.”