16 April 2001

Michelin agrees to buy Tofan assets (Rubber and Plastic News)

PARIS--Groupe Michelin has agreed to buy two tire plants, a retread facility and a domestic distribution network in Romania from Tofan Grup.

Michelin's bid for the assets of Tofan--the Romanian company that took over most of the state-controlled tire industry after the collapse of communism in 1990--was accepted over competing bids from other international tire manufacturers, according to Nomura International Inc. The merchant banking group holds a "substantial" equity stake in Tofan.

Terms of the deal weren't disclosed. When it is completed in a few weeks, Michelin will take over passenger tire operations at the Victoria S.A. plant in Floresti, Romania; the Silvania S.A. truck tire factory in Zalau; a Bandag Inc. retread facility in Bucharest; and 20 warehouses. The deal also taps Michelin into Tofan's 2,000-outlet Automaxima retail network.

"The Romanian transport and car sectors are markets with strong potential for development," said Michelin Chairman Edouard Michelin. He said Tofan's Montana passenger and Tofan truck tires control majority market shares in Romania.

Michelin didn't comment on the expected sales volume of Tofan's businesses. Tofan has reported total annual sales of about $200 million for the past few years.

Tofan retains its agricultural and implement tire businesses and plans a major expansion of these, primarily at the Danubiana plant in Bucharest, Nomura said. Tofan was an off-take supplier of farm tires to Finland's Nokian Tyres P.L.C. from 1997 to 1999, but Nokian canceled the contract, citing quality problems.

Michelin's purchase "will further raise the quality of Romanian exports and introduce more competition to the developing domestic tire sector," said Declan Walsh, director of Nomura's merchant banking group.

Nomura will continue as a shareholder in Tofan, along with the Tofan family and six other independent Romanian stakeholders, Nomura said. Nomura got involved with Tofan in 1996 when it arranged $100 million in financing for Tofan's purchases of control of Victoria and Silvania.

Tofan formed in 1991 as a handful of retail stores directed by Gheorghe Tofan. It established a Bandag retread shop in 1993 and bought a share of Danubiana in 1995.

Bruce Davis, Rubber & Plastics News staff, contributed to this report.

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