If you didn’t think the telematics game was a hot property in the business world already, then you might when you know that just one company has invested over half a billion dollars in it. Michelin, yes, the tyre company, has just announced the acquisition of Brazil, Sao Paulo based telematics business, Sascar Participações SA .
The French firm will be taking over the business immediately, which currently employs 870 people and manages over 33,000 fleets with a total of almost 200,000 vehicles. In total, Michelin will pay out 440 million euros ($596 or £356 million) for the company and hopes that the move will help it tap into large growth in South America’s trucking industry. The fact that Sascar has grown by over 15 per cent annually for the past few years, attests to that and shows promising potential returns for Michelin.
However, straight off the bat, Michelin will need to absorb some of the firms financial issues, starting with 80 million euros in debt.
Despite that debt though, Sascar is a profitable company, having made the equivalent of £75 million last year in revenue. It’s also managed to become Brazil’s top fleet management firm, with almost a quarter share of the entire market. With the big investment from Michelin, it seems likely it will be able to hold that top spot and perhaps take even more of it.
“Michelin will benefit from the client base and technical and marketing skills built up by Sascar in the rapidly expanding telematics market for professional truck fleets and thereby accelerate the development of services for its customers worldwide”, said Jean-Dominique Senard, current CEO of the Michelin Group. “This will help us strengthen an important area of growth for the Group.”
Of course this deal will only be able to go ahead if given the thumbs up by Brazilian authorities, to make sure that the deal doesn’t violate any anti-trust laws. However with the increase in trade a move like this will bring, it seems unlikely that it won’t be given the thumbs up. Chances are we’ll find out more of the specifics behind the deal (and whether it’s going ahead or not) later this year.
It seems though that while there is plenty of confidence from Michelin and Sascar that this deal will go ahead, clearly stockholders aren’t quite as pleased with the outlay of cash. Shares of the French firm fell 0.7 per cent after the news, though understandably, Sascar’s main investment firm – which netted over $200 million from the deal – saw a massive 11.2 per cent rise in value.