Continental Corporation, the German tyre manufacturer and auto component supplier will acquire Modi Tyre Company Limited (MTCL) for an undisclosed amount.
The international automotive supplier and the world's fourth largest tyre manufacturer Continental has signed an agreement with Modi Rubber Ltd (MRL), for acquisition of a 100 per cent shareholding in Modi Tyres Company Ltd (MTCL), a subsidiary of MRL. MRL said in a filing to the Bombay Stock Exchange (BSE) today.
"After completion of the transaction, MTCL will become a fully-owned subsidiary of Continental Corporation," MRL said. MTCL is a wholly-owned subsidiary of Modi Rubber Ltd and has a facility near Meerut, Uttar Pradesh. The plant has the capacity to roll out a million bias truck and bus tyres and tubes per annum.
After the acquisition, MTCL will focus on domestic market with local production and distribution of bias and radial tyres for trucks and buses, besides radial passenger car tyres for the Indian market.
"The development underlines Continental's commitment to the Indian market, which is part of the company's strategy to invest in growing markets in Asia," the company said.
The market reacted positively to the development. Shares of Modi Rubber touched the upper circuit to close at Rs 75.35 a piece, up by 10 per cent on the BSE.
Modi Rubber renewed a technical collaboration and licensing agreement with Continental to produce a million units of Continental-branded truck tyres in 2009. It was agreed that Continental tyres would be sold through a revived Modi Rubber sales network. The initial agreement had been arrived at in 2004.
The association between Modi Rubber and Continental dates back to 1974, when the two companies had arrived at a technical collaboration agreement to set up a plant in Meerut. The tyres were marketed under the name Modi-Continental.
Continental, which is present in 46 countries, is currently the fourth largest tyre manufacturer in the world.
The company has a workforce of about 150,000 employees and clocked sales of ¤26 billion last year.