MOSCOW (July 25, 2011) — Pirelli Tyre S.p.A. will take control of the former Amtel Tire's tire plant in Kirov, Russia, by November, according to terms of an agreement identifying which Russian assets Pirelli will take over within the framework of a joint venture agreement signed last November with two Russian partners.
The 68-year-old Kirov plant has annual capacity for 7 million car and light truck tires, Pirelli said, which should translate into annual sales of about $430 million by 2012.
The joint venture agreement, with Russian Technologies State Corp. and Sibur Holding, also calls for Pirelli to assume control of more production assets capable of about 4 million tires a year by 2014. The parties have not identified these assets as yet.
Pirelli also said it intends to invest up to $285 million in the 2012-2014 period in the Russian production assets the joint venture will control to upgrade the plants' capabilities and increase capacity.
The value of assets to be transferred to Pirelli control is $317.5 million, the joint venture partners said, with payment to be divided on a pro-quota basis between the partners, starting with $79 million this year and the rest next year.
Pirelli estimates the venture will be able to generate annual sales of $715 million by 2014. Pirelli said it expects the venture to realize double-digit profitability starting in 2013.
The company also said the joint venture agreement has a provision allowing Pirelli to raise its ownership stake to 75 perent from 50 percent through a three-year put-and-call option mechanism.
The tire maker said it expects Pirelli-branded products to account for half of the venture's installed capacity of approximately 11 million units, with an emphasis on winter tires for the replacement market, in particular “studdable” types to meet the needs of the Russian and eastern European markets.
Pirelli said it expect the venture's share in these markets to be approximately 20 percent.