Skip navigation
Newswire

Continental in Sime Malaysia tyre venture

KUALA LUMPUR, June 26 (Reuters) - Malaysian conglomerate Sime Darby Bhd said on Wednesday German tyre and auto components group Continental AG plans to take up an equity stake in Sime's merged tyre business.

In April, Sime unveiled a reorganisation plan for its tyre manufacturing subsidiary DMIB Bhd , which will involve taking the unit private.

Under the revamp, DMIB will be taken over by a new company, Merit Manuafacturing Sdn Bhd, which will be wholly owned by Sime.

Sime, one of Asia's oldest conglomerates, with interests ranging from palm oil to selling BMW cars, will also put its unlisted Sime Tyres International (STI) under the new company, grouping its tyre businesses together.

Sime said in a statement on Wednesday that Continental would initially subscribe for a 30 percent interest in Merit Manufacturing.

Sime and Continental will also at the same time enter into a put and call option agreement for Continental to acquire a further stake at a pre-agreed price over a period of time.

Sime said Continental's participation would strengthen its tyre operations in facing trade liberalisation brought about by the Asean Free Trade Agreement when tariffs for tyre products manufactured in Southeast Asia are lowered.

The listing status of DMIB, 51 percent-owned by Sime, will be transferred to the new company.

Sime plans to inject engineering services and trading companies into the new listed entity.

Wednesday's announcement came after the market had closed.

Sime shares ended 10 cents higher at 4.92 ringgit. DMIB closed six cents down at 1.11 ringgit.