Proving the Business Case for the Internet of Things

Michelin beefs up smart tire solutions with $596 million takeover of Brazil's Sascar

Iain Morris
June 11, 2014
European tire maker Michelin is to pay €440 million ($596 million) for Brazilian digital fleet-management player Sascar as it looks to step up its development of smart tire solutions that would reduce logistics costs for companies across a range of vertical markets.

The French company would assume some €80 million in debt in taking control of Sascar (Sao Paolo, Brazil), with the deal yet to be signed off by regulatory authorities.

Sascar has developed a range of fleet management, cargo tracking and stolen vehicle retrieval service and is the largest such player in the Brazilian market, with a share of about 23%.

Despite that, only about 4% of vehicles in Brazil are currently equipped with fleet-management technology, and Sascar expects the market to take off over the next four years, growing at a compound annual growth rate of 15% during that period.

Michelin (Clermont-Ferrand, France) already has a strong presence in Brazil as the country’s number one provider of truck tires and aims to combine its capabilities with those of Sascar to further develop its range of smart tires solutions.

Michelin says it can reduce total tire costs for customers through its predictive maintenance services, which gather and analyze data generated by sensors installed in truck tires.

The fee the two companies have agreed works out at approximately eleven times Sascar’s projected earnings before interest, taxation, depreciation and amortization for 2014.

Last year, the company reported revenues of BRL280 million, 24% more than in 2012, and managed around 230,000 vehicles in total.

A particular attraction for Michelin appears to be Sascar’s sophisticated use of software-as-a-service technology, with 160 of the company’s 870 employees working as software developers in the digital telematics area.

“Michelin will benefit from the client base and human, technical and marketing skills built up by Sascar in the fast-growing telematics market for professional truck fleets,” said Jean-Dominique Senard, Michelin’s chief executive officer.

In the short term, Michelin says that Sascar will be able to leverage its dealer network while it gains access to Sascar’s small fleet customer base, but further on the plan is to add value to existing solutions through “cross-fertilization” of data analytics and smart reporting capabilities.

Michelin expects cash flows from customer synergies to amount to between €30 million and €35 million by 2020, and expects Sascar’s revenues to grow by 15% to 20% a year over the next five years.

Sascar is currently controlled by private equity player GP Investments, which acquired it three years ago in anticipation of growing demand for remote-monitoring and asset-tracking services.
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