NEW YORK (Feb. 20, 2014) —MHR Fund Management L.L.C. has put itself in a position to become Titan International Inc.'s second largest shareholder.
The New York City-based hedge fund, headed by Mark Rachesky, disclosed in a Securities Exchange Commission filing that it paid approximately $67.8 million for 5.84 million shares of the Quincy, Ill.-based tire and wheel manufacturer, and is committed to spend $26.3 million more in outstanding call options on an additional 2.6 million shares. Together the purchases represent 10.9 percent of Titan's common stock.
MHR's stake makes it Titan's second largest shareholder, behind Blackrock Fund Advisors, which bought 1.8 million shares in late 2013 to boost its stake to about 11.4 percent.
While MHR's stock purchase raised a few rumors of a possible takeover bid by the hedge fund, Titan CEO Maurice Taylor Jr. said he was not fazed by the speculation, pointing out that it's nothing more than that.
"I'm not concerned—I just serve," he said. "In fact, I'm honored" that MHR has taken an interest in Titan.
He said he has met with Mr. Rachesky, enjoyed his company and felt comfortable with him. MHR generally invests in distressed or under-valued companies.
"I was with him (Rachesky) to tour three of our plants," Mr. Taylor said. "He said we were undervalued. And I agree with him. He's a very smart guy and has a great reputation" as an investor. "I was very impressed with him."
Mr. Taylor said he believes MHR will be a long-term shareholder of Titan, and the company will benefit from the investment as it moves ahead with its growth plan, which includes possible acquisitions.
"He told me he thinks his money is safe," Mr. Taylor said, adding that Mr. Rachesky did a year-long study of the business before making the investment.
According to its website, MHR "manages in excess of $5 billion and takes a highly differentiated, control-focused, private equity approach to investing in distressed and undervalued middle-market companies utilizing its proprietary approach to sourcing."
This report appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.