Here’s how it works. By agreeing to purchase 80% of Multistrada for close to $439 million, Michelin says it gains a “local plant with good quality facilities” and “immediately available” annual production capacity broken out as follows:

* 11 million passenger tires;

* 9 million two-wheel tires; and

* 250,000 truck tires.

Michelin will gradually convert production from Tier 3 passenger car tires to Tier 2 Groupe Michelin brands, thereby allowing more Tier 1 production at other Asian plants and supporting growth of demand of Tier 2 volumes in Europe, North America and Asia.

As part of the transaction, Michelin also will acquire a 20% stake in the retailer PT Penta Artha Impressi in partnership with Indomobil and private investors, which will boost the marketing and sales of Groupe Michelin brands in Indonesia. Michelin says this will help the company “secure significant access to a major market and be well placed to benefit from the market’s future growth and expansion.”

Michelin CEO Jean-Dominique Senard says the acquisition of Multistrada “represents an excellent opportunity for Michelin to expand its operations in Indonesia, the most populous country in Southeast Asia, and immediately gain competitive, good-quality production capacity without having to create any new manufacturing facilities.”

Multistrada CEO Pieter Tanuri says he is confident Michelin “is the ideal partner to take Multistrada forward into a new era of growth and success for the benefit of all stakeholders and employees.”

Potential synergies in manufacturing, sales and purchasing are expected to represent up to $70 million per year in savings within three years of the acquisition. Multistrada, including the 20% stake in the PT Penta and 123 acres of available land, has been valued at $700 million, which represents 6.3 times EBITDA for the 12 months ended Sept. 30, 2018, after expected synergies. Multistrada generated net sales of $281 million in 2017.

As Multistrada is a publicly listed company, and pursuant to Indonesian regulations, Michelin subsequently will launch a public offer for the remaining outstanding shares, at the same price per share as that offered to the 80% shareholder group. Michelin says the acquisition will be funded from internal financial resources and is not expected to have an impact on Michelin’s ratings.