Titan International acquires Carlstar for $296M in cash, stock

Titan International announced the acquisition of Carlstar for approximately $296M in a transaction consisting of cash and stock, which closed on February 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 FY23 adjusted EBITDA of $73M 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 $615M. The purchase price was approximately $296M and consisted of $127M of cash and $169M of TWI equity, not inclusive of estimated transaction costs of $7M 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. The new credit facility, with Bank of America as agent, was increased to $225M. 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 FY23 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.