CEAT Ltd. in Monday's trade spurted to an all-time high of Rs 3,466.4, gaining over 11 per cent over the previous day's close. The sharp gains in the stock were propelled after the company's deal with the Michelin Group.

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The deal has been inked for the acquisition of Camso brand’s Off-Highway construction equipment tyre and tracks business from Michelin. 

The transaction will include the business with revenues of around $213 million for CY 2023 and global ownership of the Camso brand along with two state-of-the-art manufacturing facilities., after an initial 3 year licencing period. (‘Business’).As per the terms of the deal,  CEAT will get global ownership of the Camso brand along with two state-of-the-art manufacturing facilities., after an initial 3 year licencing period. (‘Business’).

CEAT, an RPG company and Michelin, the global leader in tyres, announced today that they have entered into a definitive agreement for CEAT to acquire Camso brand’s Off-Highway construction equipment bias tyre and tracks business from Michelin in an all-cash deal valued at about $225 mllion or Rs 1,905 crore. 

It is expected that the transaction will be completed tentatively within 6-9 months, or such period as may be mutually agreed, subject to satisfaction of closing conditions, added the company's release.

Why this Michelin- CEAT deal is important for the latter?

According to Zee Business research inputs, Camso has a good hold in the European Union (EU) and North America aftermarket as well as the OEM segments. In addition, consequent to the deal as many as 40 international original equipment manufacturers (OEMs) buyers will join the company.

Furthermore, CEAT will benefit from the high-margin profile of off-highway tyres. Currently, the farm tyre and specialty segments account for around 14 per cent of the company's revenue.

Brokerage's view on CEAT- Michelin deal

Brokerages believe that the deal's valuation have been attractive and the deal will enable CEAT to become a global player in the specialty tyre segment. Nomura expects 10 per cent accretion in the company's EPS through the deal. 

Further as per reports the deal will contribute to around 13 per cent in the company's revenue from FY26E, while the EBITDA will be supported 20 per cent. In addition, the margins are anticipated to go higher from 11.5 per cent to 22 per cent.