Titan acquires Carlstar Group LLC

WEST CHICAGO, Ill. — Titan International, Inc. has announced the acquisition of Carlstar Group LLC. for approximately $296 million in a transaction consisting of cash and stock, which closed on Feb. 29.

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.

According to Titan officials, Carlstar:

• Brings significant new customer relationships in multiple channels, including leading wholesale distributors, national retailers, commercial servicing dealers, and OEMs.
• 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. 
• And Titan will create one of the largest specialty tire manufacturer covering commercial and consumer end markets.
• Expands Titan’s existing wheel/tire assembly capabilities, providing further value for existing and new customers.
• 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 include:

• 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 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, Titan President and Chief Executive Officer said, “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. said, “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.”