Michelin’s $1.7 billion UK deal adds conveyor belts, materials

Bloomberg

Michelin’s planned acquisition of UK conveyor-belt maker Fenner Plc for about 1.2 billion pounds ($1.7 billion) is aimed at expanding the French tire manufacturer’s mining equipment business and moving into non-rubber materials.
Under a deal unveiled, Fenner shareholders will receive 610 pence a share, which represents a 24 percent premium over the East Yorkshire, UK-based company’s price before the announcement.
Fenner investors will also receive a dividend of up to 2.1 pence a share next month. The announcement drove Fenner stock up as much as 27 percent.
“Michelin has made no secret of its determination to expand in technological materials,” Natixis analyst Michael Foundoukidis wrote in a note.
Most of its rivals lack the know-how and get supply directly from chemicals companies, he said.
Michelin plans to combine its own operations making tires for the mining sector with Fenner’s heavy-duty conveyor belts that carry materials like rock and coal out of pits. At the same time, the French company will gain a broad portfolio of products made out of non-rubber polymers. These are used for a range of goods from oil-and-gas industry pumps and valves to space and medical textiles and devices, according to Fender’s website.
“Both activities are interesting to us,” Chief Financial Officer Marc Henry said on Bloomberg TV, pointing to growing investment in the mining sector and demand for polymers outside the tire industry.
Chief Executive Officer Jean-Dominique Senard said mastering high-technology materials is key to creating value.
The tire maker will gain access to Fenner’s reach into Latin America and Asia, according to a presentation. The deal is expected to close at the end of the second quarter.
Fenner traces its roots back to the middle of the 19th century when Joseph Fenner founded the business in the city of Hull. After first selling shares to the public in 1937, the company grew into the world’s largest conveyor-belt manufacturer, servicing industries from mining to factory automation. It has about 4,300 employees and plants in seven countries including five in the US and four in Australia. Fenner shares rose 25 percent to 614 pence in London, giving a market value of 1.2 billion pounds. Michelin stock rose 0.9 percent to 126.05 euros in Paris.
The deal comes as Senard prepares to step down next year after seven years in the role. As the first outsider to lead Cie. Generale des Etablissements Michelin, he improved profitability amid rising competition from lower-cost rivals, partly by expanding Michelin’s premium product lines.