Nashville, TN
– based manufacturer of specialty wheels and tires will further
strengthen and diversify Titan's product portfolio and distribution
market channels and make Titan a "one-stop shop" within the
specialty wheel and tire space
Transformative addition includes global
manufacturing and distribution which will complement and strengthen
Titan's connections to customers around the world
WEST
CHICAGO, Ill., Feb. 29,
2024 /PRNewswire/ -- Titan International, Inc.
(NYSE: TWI) ("Titan" or the "Company"), a leading global
manufacturer of off-highway wheels, tires, assemblies, and
undercarriage products, today announced the acquisition of Carlstar
Group LLC. ("Carlstar") for approximately $296 million in a transaction consisting of cash
and stock, which closed on February 29,
2024, subject to completion of the wire transfers under the
purchase agreement and the issuance of the stock consideration. The
transaction price represents a multiple of approximately
4x Carlstar's FY 2023 adjusted EBITDA of $73 Million and is expected to be immediately
accretive to earnings per share and operating margins in 2024.
Carlstar is a global manufacturer and distributor of specialty
tires and wheels for a variety of end-market verticals including
outdoor power equipment, power sports, trailers, and small to
midsize agricultural and construction equipment. Carlstar operates
three manufacturing facilities in the US and one in China. Carlstar also internally manages twelve
distribution facilities around the world. Carlstar's global 2023
revenues were approximately $615
million.
Strategic Rationale
- Carlstar brings significant new customer relationships in
multiple channels, including leading wholesale distributors,
national retailers, commercial servicing dealers, and OEMs.
- Carlstar adds further diversification to Titan's product
portfolio, especially in outdoor power equipment, power sports and
high-speed trailers, where Titan does not have a
presence.
- The combination of Titan and Carlstar will create what we
believe to be the largest pure play specialty tire manufacturer
covering commercial and consumer end markets.
- Carlstar expands Titan's existing wheel/tire assembly
capabilities, providing further value for existing and new
customers.
- Carlstar adds four manufacturing facilities - Aiken, SC; Jackson and Clinton,
TN; and Meizhou, China –
along with twelve internally managed distribution centers in
North America and Europe.
Transaction Details
- The purchase price was approximately $296 million and consisted of $127 million of cash and $169 million of TWI equity (approximately
11.9 million shares of Titan's stock based on a volume-weighted
average price per share for transactions in Titan common stock for
45 consecutive trading days ending on February 28, 2024 date equal to $14.43), not inclusive of estimated transaction
costs of $7 million and subject to
certain customary adjustments including a working capital
adjustment based on an agreed upon working capital target.
- In order to fund the cash portion of the transaction, Titan
entered into a new domestic credit facility, effective February 29, 2024. The new credit facility, with
Bank of America as agent, was increased to $225 million (previously $125 million). The credit facility has a
five-year term with terms similar to those contained in the
previous credit facility, as well as other enhancements to further
improve availability within the borrowing base.
- The acquisition multiple is approximately 4x Carlstar's FY
2023 Adjusted EBITDA and is lower with expected synergies.
- Following the closing of the transaction, Titan's proforma
net debt to Adjusted EBITDA leverage remained at approximately 1.3x
of FY 2023 Adjusted EBITDA for the combined company, allowing the
Company continued flexibility to pursue its share repurchase
program while also prioritizing future debt repayments and growth
opportunities.
- Carlstar is majority owned by investment funds affiliated with
American Industrial Partners Capital Fund V, LP ("AIP CF V" or
"AIP") and TWI shares owned by affiliates of AIP CF V will be
subject to a standard standstill and lock up agreements; in
addition one representative from AIP CF V will join our Board of
Directors effective as of closing.
- Goldman Sachs & Co. LLC acted as exclusive financial
advisor to Titan and Bodman PLC acted as legal advisor.
- UBS investment bank acted as exclusive financial advisor
to Carlstar while Sidley Austin LLP and Baker Botts LLP acted
as legal advisors.
Paul Reitz, President and Chief
Executive Officer, stated, "I am delighted to announce our
acquisition of Carlstar, which closed this morning. This is a
transformative deal for Titan as it expands our manufacturing and
distribution footprint while also further diversifying our product
portfolio and key customer relationships, making Titan a "one-stop
shop" within the specialty wheel and tire space. Carlstar's
exciting catalogue of products are utilized primarily by consumers,
which is a much different market than Ag. In outdoor power
equipment and power sports, Carlstar wheels and tires can be
found on products such as ATV/UTVs, lawn mowers and golf carts.
Their tires can also be found on high-speed trailers where
performance is a key differentiator. In the Ag
market, Carlstar products are typically found on equipment
such as backhoes and small skid-steer units, giving Titan a best in
class offering.
I have spent a significant amount of time visiting Carlstar's
plants, and meeting their people, and we can tell you that Carlstar
is a well-run business, on a good trajectory, and we expect that
success to continue under Titan's ownership. While there is not a
significant overlap in the legacy Titan business and Carlstar
from a product and manufacturing capability standpoint, we expect
to achieve sizeable commercial and operational synergies, as we
combine these organizations. We are looking forward to sharing more
specific information with the shareholder community on our
expectations for this transaction, and our plans for the expanded
Titan, in the coming months."
Titan Chairman Maurice Taylor,
Jr. noted, "I want to congratulate Paul and his entire team
on the acquisition of Carlstar, which is a great strategic and
financial fit for Titan. Maintaining a best-in-class product
portfolio has always been a key focus for Titan and today's
acquisition is consistent with that strategy. I also want to
welcome Kim Marvin of AIP to our
Board of Directors. Kim and his team at AIP, along with the
management team, did an outstanding job growing Carlstar and
positioning the business as a market leader."
Kim Marvin added, "Titan is an
ideal fit for Carlstar and I am thrilled to have been invited to
join the Board of Directors. During our time at AIP as owners
of the business I gained an appreciation for the significant
positive momentum that the Carlstar team has created and look
forward to further supporting them as part of the Titan
family."
About Titan
Titan International, Inc. (NYSE: TWI) is a leading global
manufacturer of off-highway wheels, tires, assemblies, and
undercarriage products. Headquartered in West Chicago, Illinois, the Company globally
produces a broad range of products to meet the specifications of
original equipment manufacturers (OEMs) and aftermarket customers
in the agricultural, earthmoving/construction, and consumer
markets. For more information, visit www.titan-intl.com.
Safe Harbor Statement
This press release contains forward-looking statements. These
forward-looking statements are covered by the safe harbor for
"forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. The words "believe," "expect,"
"anticipate," "plan," "would," "could," "potential," "may," "will,"
and other similar expressions are intended to identify
forward-looking statements, which are generally not historical in
nature. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their
potential effect on us. Although we believe the assumptions upon
which these forward-looking statements are based are reasonable,
these assumptions are subject to significant risks and
uncertainties, and are subject to change based on various factors,
some of which are beyond Titan International, Inc.'s control. As a
result, any of these assumptions could prove to be inaccurate and
the forward-looking statements based on these assumptions could be
incorrect. The matters discussed in these forward-looking
statements are subject to risks, uncertainties, and other factors
that could cause actual results and trends to differ materially
from those made, projected, or implied in or by the forward-looking
statements depending on a variety of uncertainties or other factors
including, but not limited to, the effect of geopolitical
instability; the effect of a recession on the Company and its
customers and suppliers; changes in the Company's end-user markets
into which the Company sells its products as a result of domestic
and world economic or regulatory influences or otherwise; changes
in the marketplace, including new products and pricing changes by
the Company's competitors; the Company's ability to maintain
satisfactory labor relations; unfavorable outcomes of legal
proceedings; the Company's ability to comply with current or future
regulations applicable to the Company's business and the industry
in which it competes or any actions taken or orders issued by
regulatory authorities; availability and price of raw materials;
levels of operating efficiencies; the effects of the Company's
indebtedness and its compliance with the terms thereof; changes in
the interest rate environment and their effects on the Company's
outstanding indebtedness; unfavorable product liability and
warranty claims; actions of domestic and foreign governments,
including the imposition of additional tariffs; geopolitical and
economic uncertainties relating to the countries in which the
Company operates or does business; risks associated with
acquisitions, including difficulty in integrating operations and
personnel, disruption of ongoing business, and increased expenses;
results of investments; the realization of projected synergies; the
effects of potential processes to explore various strategic
transactions, including potential dispositions; fluctuations in
currency translations; risks associated with environmental laws and
regulations; risks relating to our manufacturing facilities,
including that any of our material facilities may become
inoperable; risks relating to financial reporting, internal
controls, tax accounting, and information systems; and the other
risks and factors detailed in the Company's periodic reports filed
with the Securities and Exchange Commission, including the
disclosures under "Risk Factors" in those reports. These
forward-looking statements are made only as of the date hereof. The
Company cautions that any forward-looking statements included in
this press release are subject to a number of risks and
uncertainties, and the Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, changed circumstances or future events,
or for any other reason, except as required by law.
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SOURCE Titan International, Inc.
