Titan International acquires Carlstar Group

Titan International acquires Carlstar Group

Titan International said it believes the acquisition will create "the largest pure-play specialty tire manufacturer covering commercial and consumer end markets."

Titan International, Inc. announced today the acquisition of Carlstar Group LLC. for approximately $296 million in a transaction consisting of cash and stock, which closed on Feb. 29, 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 U.S. and one in China. Carlstar also internally manages 12 distribution facilities around the world. Carlstar’s global 2023 revenues were approximately $615 million.

Titan says Carlstar brings significant new customer relationships in multiple channels, including leading wholesale distributors, national retailers, commercial servicing dealers, and OEMs. Titan also says that 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.

Titan adds that the combination of Titan and Carlstar will create what the company believes to be “the largest pure-play specialty tire manufacturer covering commercial and consumer end markets.”

In addition, Titan says that Carlstar will expand 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 12 internally managed distribution centers in North America and Europe.

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 Feb. 28 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 Feb. 29. 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 pro forma 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.

“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,” said Paul Reitz, president and chief executive officer of Titan International. “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, lawnmowers 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.”

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