Trelleborg signs deal to acquire CGS Holding

Closing of the transaction is subject to approvals from relevant authorities and is expected to be completed in the first half of 2016.

“I am very proud to announce this highly complementary acquisition, which is a significant and attractive add-on to our existing businesses. CGS, with its strong and favorably performing operations in agricultural and industrial tires as well as engineered polymer solutions, will strengthen and complement Trelleborg's already leading positions in a number of existing areas,” said Peter Nilsson, President and CEO of Trelleborg.

With the acquisition of CGS and its subsidiary Mitas, Trelleborg is establishing itself as a global leader in agricultural tires and reinforces its leading position in industrial tires. As a result of the acquisition, Trelleborg Wheel Systems will almost double its revenues, broaden its geographical reach and add new positions in complementary tire niches. Mitas is performing strongly despite the current downturn in the agricultural market. Moreover, the acquisition of CGS's other industrial polymer businesses will enhance Trelleborg's leading positions in several of the Group's existing business areas.

“CGS highly complements our manufacturing footprint with well-invested and competitive production facilities in Central and Eastern Europe, the US and Mexico. The transaction adds to our capabilities, represents a strong strategic fit and is expected to generate significant synergies and cross-selling opportunities. The plan is to gradually integrate the acquired entities into Trelleborg's existing business areas. We regard the purchase price as attractive given the synergy potential and expected recovery for the agricultural market,” Nilsson added.

According to Trelleborg's preliminary assessment, the cost synergies are expected to be in excess of SEK 300 million ($35 mn) annually compared with 2015, gradually realized over three years.

The acquisition will be financed through committed bank facilities. Trelleborg's leverage will initially be slightly above 3x Net Debt/EBITDA on a pro-forma basis. This is higher than Trelleborg's long-term ambition and the intention is to return to a leverage ratio similar to the levels prior to the acquisition over the next 12-18 months. (SH)

Fibre2Fashion News Desk - India