Titan International is proposing an all-share offer for Titan Europe valued at more than $180 million.
The deal amounts to one Titan International common share per 11 Titan Europe ordinary shares. According to the convoluted language of the official statement disclosing the proposed offer, Titan International is after not less than 51% of Titan Europe shares and 51% of its voting rights. The company already holds 21.67%.
According to Titan International, the proposed offer values Titan Europe shares at approximately 123.9 pence per share and the entire issued and to be issued share capital of Titan Europe at approximately $181 million (based upon the closing price of $21.17 per Titan International common share on July 25 and an exchange rate of $1.5527/£1). This is said to represent a premium of 11.7% over the closing share price of Titan Europe on July 25 and a premium of approximately 9.7% over the closing price of Titan Europe on July 16.
Titan International believes there is “compelling logic” behind the acquisition of Titan Europe and that it will establish “a truly global wheel, tire and track industrial group servicing customers across the agricultural, construction, earthmoving and mining industries.”
Of course Titan Europe is well-known to Titan International, having been spun-off by Titan International onto the FTSE AIM (Alternative Investment Index) in April 2004. Back then, Titan International retained a substantial holding in Titan Europe’s share capital and, as of the date of this announcement, Titan Luxembourg, a wholly-owned subsidiary of Titan International, holds a 21.67% shareholding (18,993,821 shares) in Titan Europe’s issued share capital.
The Titan International board now believes that Titan Europe would once more benefit from being part of a larger group with a strong balance sheet, which could achieve greater revenue growth and increased profitability than on a standalone basis. That does not mean, however, that the earnings from Titan Europe Shares will be greater than those for the preceding financial period.
In an official statement, the U.S. firm pointed to possible synergies between the two companies: “Titan International considers Titan Europe to have a strong presence in its chosen markets with a complementary product offering, customer base and strong manufacturing capabilities that fit well with Titan International’s stated aim of increasing its global presence to service its customers better. In particular, the Titan International board believes the acquisition of Titan Europe presents opportunities for Titan International’s tire business in South America and Europe, and will cement the existing co-operation between Titan International Mining Services, established in 2011 to offer complete tire, wheel and track services near large mines worldwide, and Titan Europe’s own Mining Service Centers expertise.”
Further consolidation in the wider industry is also likely to follow, with Titan International aware of the strength that a combination of the two companies would potentially offer. On the downside, Titan International’s board also pointed out that it is “mindful that a number of the markets and industries in Europe in which Titan Europe operates are experiencing economic uncertainty, which is likely to continue and which has the potential to impact those markets and industries.” (Tyres & Accessories)
