Michelin expanding high-tech materials business with $764 million acquisition

CLERMONT-FERRAND, France—Michelin, in moving beyond tires, is looking "to become a global leader in high-tech engineered fabrics and films" with the pending purchase of Paris-based Flex Composite Group for more than $764 million, according to the French tire manufacturer.

The transaction, announced June 19, is expected to close sometime in the third quarter of this year.

Michelin agreed to purchase FCG, which has six manufacturing subsidiaries throughout Northern Italy, from IDI, a French private equity firm.

Financing was completed with 100-percent available cash, Michelin said.

"Michelin's strong financial position will be maintained post-transaction," Yves Chapot, general manager and chief financial officer for Michelin Group, said during a June 19 investor presentation. "This is an important step to developing Michelin beyond mobility and positioning it as a key player in polymer composite solutions, in line with the Michelin in Motion 2030 strategy.

"We will leverage both companies' distinctive capabilities to unlock ... innovation synergies in a broad range of products and applications."

The acquisition, when finalized, is expected to boost overall revenue within Michelin High-Tech Materials (which represents between 3 and 5 percent of overall Michelin Group sales revenues) by about 20 percent, Chapot said.

FCG saw about $220.5 million in annual revenue last year, according to Michelin, with an EBITDA margin of between 25 and 30 percent.

Organic growth between 2015 and 2022 measured at about 11 percent per year for the firm.

"FCG has enjoyed very substantial growth in its business in the last years," said Emmanuel Capriglione, general manager of FCG. "This success is due to recognized expertise in composite materials and films, a capacity for innovation and a strong desire to constantly improve the service provided to its customers.

"With Michelin, FCG will be able to increase its capacity for innovation, its actions to reduce its environmental footprint and to provide its customers with more sustainable materials."

FCG has about 400 employees who serve the marine, supercars and electric vehicles, sports and construction industries.

Specifically, FCG works in resin-impregnated fabrics (Angeloni and Selcom brands), flexible coated fabrics (Orca) and technical films and membranes (FaitPlast).

Resin-impregnated fabrics comprise about 50 percent of sales for FCG, with coated fabrics at about 29 percent and films and membranes at about 21 percent (mostly in the technical apparel space), according to Michelin.

"FCG masters a wide range of polymer composite solutions, adjacent to those already developed by Michelin," Chapot said.

Growth drivers for the firm include electrification in the mobility sector, "dynamism of sports cars and supercars segments" and increasing demand for carbon composites in yacht, sailboat and the construction industries.

Besides the high-tech engineered fabrics and films that FCG brings to the table, Michelin High-Tech Materials includes sealing technologies, belting and engineered polymers.

The division sees about 45 percent of its sales in the Americas, with 37 percent in the Asia-Pacific region and another 18 percent in EMEA, according to Michelin.

Conversely, FCG sees about 4 percent of its sales in the Americas, 9 percent in APAC and the lion's share in EMEA at about 87 percent.

While Michelin can access FCG's material know-how, FCG will be able to leverage Michelin's footprint to grow in N.A., Chapot said, as well as Michelin Group's deep roots in defense, aeronautics and high-end automotive markets.

"This is part of our goal to enhance people, profit and planet performance, which is at the heart of our future success," Chapot said. "It is a leadership model that puts people, teams and empowerment at the center of our mindset and behaviors.

"And this will serve our mission to accelerate research and development related to the next generation of materials."

And this plays into the notion of sustainability, which is part and parcel with Michelin's stated planet priorities.

"Synergies in fabrics and films gives us a clear roadmap toward 100-percent sustainable materials by 2050," Chapot said. "And we will accomplish this with dedicated R&D programs."

Florent Menegaux, CEO of Michelin, welcomed FCG into the fold for the tire maker.

"This operation draws on the best of both companies, in particular on our shared expertise in polymer composite solutions," Menegaux said. "We are aiming to generate synergies and to push back the frontiers of deep-tech innovation in a wide range of new products and applications."