Titan International, Inc., a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, announced Feb. 29, 2024, the acquisition of Carlstar Group LLC. ("Carlstar") for approximately $296 million in a transaction consisting of cash and stock, 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.
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.
