The Nashville-based speciality wheels and tyre manufacturer will further strengthen and diversify Titan’s product portfolio and distribution market channels, making Titan a “one-stop shop” within the speciality wheel and tyre space.
Expanding Titan’s Global Reach: Transformative Manufacturing & Distribution
Titan International, Inc., a leading global manufacturer of off-highway wheels, tyres, assemblies, and undercarriage products, today announced the acquisition of Carlstar Group LLC. 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. It is expected to be immediately accretive to earnings per share and operating margins in 2024.
Carlstar is a global manufacturer and distributor of speciality tyres and wheels for various 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.
Expanding Market Reach and Sector Presence through Carlstar’s Integration
Carlstar’s integration into Titan introduces a host of new customer relationships across various channels, spanning wholesale distributors, national retailers, commercial servicing dealers, and OEMs. This strategic move broadens Titan’s market reach. It enhances its standing in key sectors where it previously lacked a presence, such as outdoor power equipment, power sports, and high-speed trailers.
The merger between Titan and Carlstar heralds the formation of what is anticipated to be the largest pure-play speciality tyre manufacturer across both commercial and consumer end markets. This union not only consolidates Titan’s position in the industry but also injects further diversification into its product portfolio, paving the way for sustained growth and profitability.
Furthermore, Carlstar’s addition augments Titan’s wheel/tyre assembly capabilities, offering added value for existing and prospective customers. With the inclusion of four manufacturing facilities in Aiken, SC; Jackson and Clinton, TN; and Meizhou, China, alongside twelve internally managed distribution centres in North America and Europe, Carlstar significantly expands Titan’s operational footprint, laying a robust foundation for future endeavours.
Overview of Carlstar Acquisition Terms
The acquisition of Carlstar by Titan amounted to approximately $296 million, comprising $127 million in cash and $169 million in TWI equity, equivalent to around 11.9 million shares of Titan’s stock. This valuation was based on a volume-weighted average price per share for transactions in Titan common stock over 45 consecutive trading days ending on February 28, 2024, equating to $14.43 per share. Not included in this figure were estimated transaction costs of $7 million, subject to customary adjustments, including a working capital adjustment based on an agreed-upon target.
To finance the cash component of the transaction, Titan secured a new domestic credit facility effective February 29, 2024, with Bank of America as an agent. This credit facility, increased to $225 million from its previous $125 million, holds a five-year term with terms similar to the previous arrangement, including enhancements to bolster availability within the borrowing base.
The acquisition multiple stood at approximately 4x Carlstar’s FY 2023 Adjusted EBITDA, with expectations of lower multiples post-synergies. Following the transaction’s closure, Titan’s pro forma net debt to Adjusted EBITDA leverage remained at around 1.3x of FY 2023 Adjusted EBITDA for the combined entity, ensuring continued flexibility to pursue the company’s share repurchase program alongside prioritizing future debt repayments and growth initiatives.
Majority-owned by investment funds affiliated with American Industrial Partners Capital Fund V, LP (“AIP CF V” or “AIP”), Carlstar’s TWI shares owned by AIP CF V affiliates will be subject to standard standstill and lock-up agreements. Additionally, one representative from AIP CF V will join Titan’s Board of Directors effective upon closing.
Goldman Sachs & Co. LLC served as Titan’s exclusive financial advisor, while Bodman PLC acted as legal advisor. UBS Investment Bank acted as Carlstar’s exclusive financial advisor, with legal advisory provided by Sidley Austin LLP and Baker Botts LLP.
Paul Reitz on Titan’s Acquisition of Carlstar: A Transformative Expansion
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 speciality wheel and tyre 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 tyres can be found on products such as ATVs/UTVs, lawnmowers and golf carts. Their tyres 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.”
