Bridgestone buys Otraco

BRIDGESTONE has bought tyre management specialist Otraco from Downer for $79 million to accelerate the growth of its mining solutions business and expand its service network in Australia, Chile and South Africa.
Bridgestone buys Otraco Bridgestone buys Otraco Bridgestone buys Otraco Bridgestone buys Otraco Bridgestone buys Otraco

Bridgestone has bought Otraco for $79 million.

Otraco was a major player, alongside Klinge, in helping miners deal with the tyre shortage in the early 2000s.

At the time a mining sized bias-ply tyre - which was inferior in most mining uses to a steel radial tyre - was selling for north of $100,000. That was because demand for tyres was so high, the contracted output for steel radials from majors such as Bridgestone and Michelin, had already been taken up.

This was a shock to the miners, who had treated their tyres as a plentiful commodity. A damaged tyre was considered a problem because it had to be disposed of. Many broken tyres became parts of windrows on haul roads.

However, as the tyre crisis bit it was not too long before miners were digging up the old dumps and pulling tyres out of windrows to see if they could be patched up and put back into service.

One of the big names of that era, Otraco was bought by Downer subsidiary Roche Mining in 2006. Roche had also bought mining consultancy Snowden.

Kal Tire bought Klinge in 2016.

Otraco offers a range of tyre management solutions that track tyres across the full lifecycle.

One of its key tools is the Otracom platform, which is designed to help manage tyres, rims and chains fitted to heavy equipment. It integrates with tyre-pressure monitoring systems, fleet management and enterprise resource planning systems.

Bridgestone will get all Otraco business assets including sales offices and training facilities, off-the-road tyre customer relationships and its 860 employees.

The Japanese tyre-making giant is investing in its core tyre business while pursuing merger and acquisitions that expand and enhance its solutions offering.

It believes Otraco will complement its tyre products and solutions, including its Mastercore surface mining tyres and its own tyre monitoring and management solution.

Bridgestone chief operating officer and representative executive officer Masahiro Higashi said acquiring Otraco would let Bridgestone quickly expand its mining solutions business in key markets and create growth opportunities with existing mining customers.

"Otraco has an extensive service network built on strong customer relationships and we are excited for its team of experts to join Bridgestone," he said.

Bridgestone has been growing its service offering in Australia through its mining solutions centres. It set up the first in Port Hedland in 2017 and added the Hunter Valley Mining Solutions Centre last year.

Those MSCs, which are designed to offer Bridgestone's tyres and diversified solutions as a service, could be rolled out globally.

Bridgestone also started direct shipping tyres to Port Hedland, which it believes will reduce transit time for large mining tyres by about 24 days.

Downer began calving off its mining business in July with the sale of Snowden to Datamine.

It has since sold off Downer Blasting Services, Open Cut Mining West and exited its underground mining business.

Downer CEO Grant Fenn said the sale of Otraco was another important step in the divestment of its mining portfolio as it pivoted into urban services.

"The sale of Otraco follows Downer's exit from its underground mining, Open Cut Mining West, Downer Blasting Services and Snowden consulting businesses and also our share in the RTL Mining and Earthworks joint venture," he said.

"We remain in active discussions with a number of interested parties in relation to the Open Cut Mining East business."

Downer expects proceeds of $605 million from the sale of its mining and laundries assets so far.

It has received $476 million of that to date.