Opex Awards 2016: EMEA, large cap – KKR

In just three years, KKR assisted Alliance Tire Group (ATG) reach its goals of grabbing further market share, broadening its global presence and establishing itself as a worldwide brand.

KKR acquired a majority stake in the Netherlands-based producer of off-highway tyres (OHT) – which has a significant presence in India and Israel – in April 2013. By the time of exit in July this year in a sale to Japan’s Yokohama Rubber Company for an equity value of $1.2 billion, the company’s share of the market had doubled from 4 percent to 8 percent under its brands Alliance, Galaxy and Primex. Production capacity had also more than doubled from 73,000 tons annually in 2013 to 170,000 tons; and, impressively, the company offered the broadest range of products of any OHT manufacturer.

ATG operates in an expanding segment of the global tyre industry, but growth during KKR’s investment was not assured. The sectors ATG supplies, such as agriculture, forestry and construction, are cyclical. Revenue growth figures over the course of the hold period were not disclosed, but financials for fiscal year 2015 were robust. Operating profits stood at $95 million with annual sales of $529 million, according to Yokohama Rubber.

KKR Capstone team members based in Asia, the US and Europe dedicated about 13,000 hours to the investment. The firm, through one of its KKR Capstone executives, supplied an interim chief operating officer for nine months as the company searched for a permanent replacement, and assisted with other key hires globally.

Early on, KKR’s operational initiatives included introducing management to equipment manufacturers to facilitate expansion into new areas; streamlining sourcing benefitting from its procurement expertise in Asia; acquiring assets to grow scale; and optimising the use of working capital.

Not least among its achievements was the launch of a new plant in Dahej in Gujarat in late 2014, its third globally and second in India. The plant is now operational and was accompanied by new go-to-market strategies for Asia, Eastern Europe, Africa and Latin America.

“What stood out for me with ATG versus other strong submissions, was that KKR Capstone supported a major reshaping of the business in parallel across three continents in what was a relatively short hold period,” said judge Miles Graham.

“It was extremely difficult to choose the winner in this category,” said another of the judges, Katja Salovaara. “KKR took ATG to the next level in an impressive case of operational improvements and scaling up ATG.”

Among factors that singled out ATG was KKR’s intense engagement; its strategic focus on improving the quality and range of products and brand recognition; and the introduction of sustainability initiatives, which reduced energy consumption and scrap waste, she said.

With its new owners, the company joined the ranks of the top 10 global tyre producers. Around the same time, it received an endorsement of another sort: ATG tyres featured in the movie Batman v Superman: The Dawn of Justice, fitted to the Batmobile, no less. A true brand achievement.