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A Smaller Apollo Tyres of India to buy out a Bigger Cooper of USA ~ Foolish or Fantastic !?

A Smaller Apollo Tyres of India to buy out a Bigger Cooper of USA ~ Foolish or Fantastic !? Market thinks it’s Foolish as it dropped Apollo down over 25% !

The Deal Size announced is US $ 2.5 Billion ~ Apollo Tyres Share Price took a massive beating on Thursday losing over one fourth of it’s Market Cap by closing over 25% down at Rs 68.60 ( Rs 1 FV)  from Previous Day Closing of Rs 92 on BSE  with Trading Volumes at over 8 million shares and over ten times the  Two week Average before considering  this Thursday abnormal Volume

Market Cap is down to Rs 3457 Crs or @ US % 591 m at Exchange Rate of Rs 58.41 to the US $

So an interesting perspective is that Apollo Tyres with a Market Cap of under US $ 600 m is taking over Cooper at US $ 2.5 Billion ~ that’s  nearly  five times Market Cap

Foolish or Fantastic !?

So is Apollo Tyres a Buying Opportunity at @ Rs 69 !?


4 thoughts on “A Smaller Apollo Tyres of India to buy out a Bigger Cooper of USA ~ Foolish or Fantastic !?”

  1. Hi Gaurav,

    Extremely thankful to you Gaurav
    In a field where everyone tries to rob each other, there are very few people like you who guide others in right direction

    Best Regards

  2. Sir,

    It looks like 30yrs bull run on US bond market is coming to end soon,could you please post your views for that perspective on apollo issue

  3. Gaurav Parikh

    Sameer,you are being really kind
    …and Anurag what you’re probably referring too is that the US Fed has hinted it will soon begin tapering of bond buying as economy shows some sustainable signs of recovery ~ the US 10 year yield has moved up from 1.8% to 2.2% ~ of course the argument is being developed by evidence that QE Measures actually took Yield up and the fall in yield has been only because of the near Zero Rate Interest Policy pursued by US for the Economy Recover ~ Whatever ~ Apollo Tyres is creating US $ 450 m debt in the Indian Books for the US $ 2.5 b Cooper buyout Deal while Cooper itself will issue Bonds of US $ 2.1 b to be guaranteed by Apollo Tyres’s European Entity ~ Apple recently raised a record US $ 17 b to fund return to shareholders of US $ 100 b in the coming years ~ the bonds were on both floating and fixed basis and for various maturities from a few months to 30 years issued and it missed highest grade rating and 10 year coupon rate was 2.375% and it was 3.85% for the 30 year bonds ~ However Cooper will have to issue at a higher Coupon Rate to offer higher yields ~ Company has revealed it plans to issue Bonds of 7 to 8 years maturity at current high yield benchmarks range of 6.75% to 9.5% ~ however these will be on a bullet repayment basis which means servicing merely the Interest every year while principal will be paid on maturity ~ Obviously Debt Equity moves up but Apollo Tyres states that China and US Markets open out to them and the consolidated sales will show only 22% sales from India from the current 65% ~ This is a bold aggressive acquisition by Apollo and that it is being funded fully by Debt is straining the balance sheet and only good profitability going forward five years and beyond will it be able to service this greatly increased debt and make this a winning decision on hindsight ~ Market has sensed this higher risk and slammed Apollo Tyres Share Price by one third inside two days !~ Bold Move by Kanwar of Apollo Tyres not only to buyout a bigger US Company but also pay a 4.4 EBITDA Multiple and a 40% premium to Coopers Market Price ~ Coopers Share Price zoomed up 41% while Apollo Tyre crashed over 30% to Rs 65 levels ~ will it fall further to Rs 30 to Rs 40 or move back to Rs 90+ ? Interesting Years ahead for Apollo Tyres to justify this Deal Price

  4. Thank you sir,for taking the time to expain it in such simple terms.

    do not know but may be ‘Darr ke aage jeet hai’?.

    when Kanwar can gample with ‘All In’
    i can atleast take 100 shares and forget Rs.6500



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