Aeolus seeks to raise $840M for Pirelli deal

Aeolus seeks to raise $840M for Pirelli deal

JIAOZUO, China — China's Aeolus Tyre Co. Ltd. is seeking to raise $840 million through a public share offering to cover the cost of acquiring a 90-percent stake in Prometeon Tyre Group — Pirelli & C. S.p.A.'s commercial tire unit — and other industrial tire assets.
According to an April 13 filing, the deal is pending regulatory approval.
Upon completion of the deals, Aeolus is set to become China's largest commercial tire maker — and potentially the world's fourth largest — with annual capacity for truck, bus, farm and industrial tires of 18 million units and nearly $3 billion in annual revenue, according to the filing.
Last year Aeolus suffered a 10-percent drop in annual revenue to $1.1 billion.
Aeolus owns 10 percent of Prometeon, and the remaining 90 percent is valued at $680 million. Other targets of the takeover include full stakes in Guilin Tire Co. Ltd., which has 1 million annual capacity for truck and bus tires, and certain land and property of Qingdao Yellow Sea Rubber Co. Ltd.
Both companies are ChemChina affiliates.
Aeolus also is raising up to $295 million through private placement for a series of expansions in China as well as Prometeon's sites overseas.
Among the projects identified are:
  • Prometeon has earmarked $80 million for investment in a truck and bus tire project at its Izmit, Turkey, factory and $18 million for an agricultural tire project in Brazil. Both are scheduled to start operations in 2020.
  • An additional $28 million will be invested in upgrading the manufacturing facilities for Pirelli's Spiral Advanced Technology for Truck technology at the company's plants in Brazil, expected to be completed over two years.
  • Prometeon's headquarters in Milan also will receive $29 million for information technology system upgrading.
  • On the domestic front, Aeolus is setting up a global industrial tire research center in its headquarters city of Jiaozuo with a $22 million investment in two years. The city will house an expansion project as well for giant tire and other engineering tires with a $23 million investment and an 18-month construction period.
  • The company also is spending $98 million on facility upgrades in Guilin, Jiaozuo, Taiyuan and Qingdao, China, over a period of four years.
"[Such projects] will help Aeolus optimize its global capacity allocation, more efficiently utilize its resources and better cater to its local customers with a stratified branding strategy," the company said in its filing.