BRUSSELS—The European Commission has approved Bekaert S.A.'s acquisition of Pirelli & C. S.p.A.'s steel-cord activities, although additional “merger control procedures” are still ongoing in Turkey and Brazil, Bekaert said.
Brussels-based Bekaert agreed to buy Pirelli's steel-cord business in February for $350 million.
The business generates $410 million in sales annually, with production at plants in Italy, Romania, Turkey, China and Brazil.
The deal includes a long-term tire-cord supply agreement with Pirelli.
Pirelli said at the time the deal would allow it to leave a business where it “lacks competitive scale” and instead will be able to focus resources on its higher-margin premium tire activities.
The announcement accompanied a generally positive set of first-half results for Bekaert, which reported operating income for the six months ended June 30 of $161.9 million on sales of $2.21 billion. Income was up 32.5 percent, while sales dropped 2.7 percent.
Automotive applications, including tire manufacturing, make up 36 percent of Bekaert's annual sales, not including the Pirelli activities.
The EMEA region delivered “excellent results” driven by strong demand and regained competitiveness, while the rubber reinforcement platform in China defended its market share in a highly competitive market.
The climate in North America “remained difficult for domestic industries … but picked up modestly in the second quarter of the year.”
Bekaert said it had managed to maintain its market positions in Latin America but was affected by economic downturn in the region, and by fiscal and political instability in several countries.
Looking ahead, Bekaert said it “anticipates a moderate slowdown in the European tire markets and an impact of the usual seasonal effects in the second half of the year. We believe our markets in Latin America have bottomed out.
“We also expect to start seeing some benefits from recent investments come into effect in the second half of 2014,” the company said, “and we will accelerate capital investments in the coming months to support future growth.”
Bekaert is assuming an unchanged overall global business climate for the rest of the year, but remained cautious on the outlook because of anticipated further price erosion in Chinese tire markets along with as-yet incalculable effects of the pending U.S. import duties on Chinese tire production.