Maine Industrial Tire L.L.C. has sold the pneumatic tire assets at its specialty tire plant in Xingtai, Hebei, China, to Sweden's Trelleborg A.B., which will use the capacity there to support its expanding agricultural tire business in Asia.
Wakefield-based Maine Tire retains control of the solid tire production assets at the site, which it will continue to operate as Hebei Starbright Tire Co. Ltd. under its own ownership.
There is a “definitive demarcation” between the pneumatic and solid tire production lines at the factory, Maine Tire said, which will allow for a clean split between the two companies. Trelleborg's taking over about one-fourth of the plant's floor space and 180 employees, the companies said.
Maine Tire President and COO Troy Kline stressed that pneumatic tires “are not core to our long-term business strategy,” even though the company had continued to make them under third-party brands.
“The sale of the pneumatic assets would allow for better alignment of our global resources,” Mr. Kline said. “Maine Tire will now have a singular focus on its core business—building world-class solid tire products for the conventional forklift, construction and specialty markets.”
Terms of the sale were not disclosed, but Trelleborg said it has budgeted $15.6 million for the acquisition and for investments over the coming three years. The new company is called Trelleborg Wheel Systems Xingtai Ltd.
“Our customers are becoming increasingly global. They are now becoming established in Asia, mainly in China, which is why we are implementing this acquisition,” said Maurizio Vischi, president of Trelleborg Wheel Systems S.p.A., the Swedish company's Tivoli, Italy-based tire business unit. “This is an excellent way of entering the rapidly expanding Chinese market.”
Through this deal, Trelleborg said it becomes the first Western farm tire maker to have its own production in China. The establishment provides proximity to Chinese customers as well as support to European and U.S. customers in the local Chinese market.
“The project represents an important step forward for our company in creating added value for our customers and in reinforcing our brand-leading position as a specialist in agricultural solutions” said Paolo Pompei, president of agricultural and forestry tires for Trelleborg. “There is huge potential in Asia for the development of agricultural mechanization.”
For example, he said, only 41 percent of Chinese farm work is mechanized and there are 300 million acres of arable land, or about half again as much as in Western Europe.
“This acquisition will give us a lead in this expansive market,” Mr. Vischi said. “There is enormous potential within agricultural machinery in China. Today, more than half of all agriculture in the country is conducted manually and the shift to using more vehicles and machinery is taking place rapidly.”
Trelleborg said it expects to begin making Trelleborg-branded products as soon as the second quarter. Trelleborg Wheel did not quantify what sort of growth it expects; it derives only about 6 percent of its global sales from business in Asia, according to company documents.
The plant will strengthen Trelleborg Wheel Systems' competitiveness also in other markets besides China, by broadening the range and through more cost-efficient production, Trelleborg said. The company also maintains tire manufacturing at plants in Sri Lanka and at its headquarters in Tivoli.
Maine Tire had acquired the Xingtai factory in late 2009 as part of its buying GPX International Inc.'s manufacturing assets through the bankruptcy court for $10 million.
Trelleborg also recently completed its $32 million purchase of Watts Tyre Group, a Lydney, England-based industrial tire maker. Watts is expected to generate annual sales of about $42 million for Trelleborg Wheel, which recently reported a 7.1-percent drop in fiscal 2010 operating income to $36.9 million on sales of $414.7 million.
Meanwhile, Maine Tire is in the process of moving its industrial tire capacity to its Red Lion, Pa., wheel factory and distribution center from its Gorham, Maine, plant—which it plans to close around mid-year—and to the Xingtai plant.
Maine Tire expects that this transaction and subsequent investment into its facilities will result in a “financially stronger and cost competitive company that will better serve its loyal customers.”