06 April 2001

Starting today, Tofan tyres read Michelin (Ziarul Financiar)

Tofan Group, the leading tyre maker in Romania, today will hold a press conference to announce the completion of negotiations with French company Michelin and the signing of a contract to sell controlling interests in three of its six tyre factories.

Truck tyre maker Silvania Zalau, car tyre maker Victoria Floresti and recapped pneumatic tyre maker Tofan Recap will be sold for an yet undisclosed sum, according to market sources.
Michelin will buy the 49% stake that financial investor Nomura International Plc holds in the three factories, as well as a stake held by the president of the group Gelu Tofan. The transaction will leave Michelin holding the controlling interests in the three tyre factories.

In 1997, Nomura paid $100 million for 49% in the entire holding, so that it will keep holding a stake in the other divisions of the group.

Tofan Group officials declined to comment on the information about the sale of the three factories, but announced they would have a statement prepared for the news conference today.

Tofan Group has recently bought stakes worth 125bn lei (about $5 million) in Victoria Prahova and Silvania Zalau in two public offerings run through RASDAQ.

Tofan Group is an entirely private held Romanian company set up by Gelu Tofan in 1992. The tyre factories part of the group have either been bought from the State Ownership Fund, or built in 1996, 1997 and 2000.

Operating profit in 2000 reached nearly 75bn lei against turnover in excess of 5,000 billion lei. The group is currently employing 7,000 people.

France-based Michelin is considered to be the world's number one tyre maker with Japan's Bridgestone breathing down its neck. Bridgestone had its handful of trouble last year because of the many accidents involving the vehicles geared with Bridgestone tyres. The commission that investigated the accidents blamed them on tyres.

The world tyre market is highly concentrated with an extremely tight competition. Its value is estimated at $70bn with an annual growth pace of 2-3%.

Tyre business worldwide is run by three big players (Michelin, Bridgestone and Goodyear, Japan), holding 60% of the market. Four medium players hold 17%: Sumitomo (Japan), Continental (Germany), Pirelli (Italy) and Yokohama (Japan). The rest of the market, standing at 23%, is divided among small producers.

The main markets of the leaders are Europe (Michelin), North America (Goodyear) and Asia (Bridgestone).

Over the past 20 years, 50% of the leading tyre makers have vanished. Michelin bought BF Goodrich and Uniroyal, Bridgestone bought Firestone, Continental took over General and Goodyear engulfed Dunlop.

Dragos Nedelcu , Laurentiu Ispir

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