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No rumor: Michelin buys 10% stake in Gajah Tunggal

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Groupe Michelin has purchased a 10% interest in PT Gajah Tunggal Tbk, perhaps the largest tire manufacturer in Southeast Asia.

In its report to the Jakarta Stock Exchange on Friday, Gajah Tunggal (GT) revealed it had signed an agreement with Michelin to produce and distribute BFGoodrich brand consumer tires for the Indonesian replacement market. It also will distribute the Michelin brand.

Michelin bought 10% of the company's shares "to strengthen the deal," according to GT.

In announcing the deal, the Jakarta Post reported that GT "refused to disclose the value of the deal, but according to analysts it may be worth around 600 billion rupiahs ($67 million)."

The newspaper article also wrote that Indonesia's tire industry "is facing surplus stock with installed capacity reaching 37 million tires per year and demand, 22 million

per year.

"Also, (inexpensive) tires from China have been flooding the local market, dealing a heavy blow to the industry here. The tires are reportedly

smuggled into the country, or undervalued during the clearance process."

GT, based in Jakarta, Indonesia, is owned by Singapore-based Garibaldi Venture Fund Ltd.

On March 3, the Indonesian newspaper Bisnis Indonesia reported that Groupe Michelin was attempting to take control of PT Gajah Tunggal Tbk.

At the time, Michelin supposedly was negotiating with Garibaldi Venture for its 78% interest in PT Gajah Tunggal and 20.4% interest in PT GT Petrochem Industries (Gajah Tunggal owned just over 50% of GT Petrochem). Garibaldi reportedly had paid a combined 1.83 trillion rupiah ($203.6 million) for its interests in the two companies.

The article also quoted a banking industry official close to the negotiations, who confirmed Michelin was involved in the sales.

However, a Michelin North America spokesperson told Modern Tire Dealer the news was a rumor. Gajah Tunggal also denied involvement by Michelin.

Gajah Tunggal owns eight facilities -- some under the Grandtour Tire name -- in Southeast Asia.

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