SYRACUSE, N.Y.—In a move expected to significantly expand its tire and wheel business, Syracuse-based Carlisle Companies Inc. has agreed to purchase Titan International Inc. for approximately $600 million, including assumption of debt. Carlisle, a diversified manufacturer of construction materials, automotive components and industrial products, as well as the parent corporation of Carlisle Tire & Wheel Co., will purchase all of Titan's outstanding shares and assume the Quincy, Ill.-based company's debt. The transaction is expected to be completed before the end of November.
According to the companies' Aug. 3 announcement, each Titan share will be converted into the right to receive a fraction (equal to about one-third) of one Carlisle share. Titan said it has about 20.6 million shares outstanding.
Carlisle, whose tire and wheel unit specializes in products for smaller vehicles used for lawn and garden and recreational purposes, said the proposed merger will expand its range of products.
Titan produces large wheels and tires for construction, agricultural and other off-highway applications, and has manufacturing and distribution facilities in Europe and South America, as well as the U.S.
Carlisle posted net income of $84.9 million in 1998 on sales of $1.52 billion. With the Titan transaction, the tire and wheel business will account for more than 50 percent of Carlisle's overall sales.
The addition of Titan, which had sales of $660.8 million in 1998 in the agricultural, construction and off-the-road tire and wheel markets, will increase Carlisle's tire and wheel business to about $1.1 billion and overall sales to about $2.2 billion, said Titan President and CEO Maurice "Morry" Taylor.
Lately, Titan has been struggling with production cutbacks due to a bitter 14-month-old strike at its Des Moines, Iowa, tire plant and a similar work stoppage at its Natchez, Miss., plant that's been going on since September of 1998. The company has hired replacement workers in both cases and has said it is closing in on pre-strike capacity at the two plants.
Carlisle Chairman and CEO Stephen P. Munn said the combined companies will be able to provide the market with outstanding technology, a more favorable cost base, broader product line, enhanced global presence and better customer service. ``We are most enthusiastic about this transaction,'' he said.
A definitive merger agreement will be subject to the approval of both companies' boards of directors and stockholders.
Mr. Taylor called the proposed merger a ``great opportunity'' for both companies. He said Carlisle is a ``well-established company'' and Titan is a ``young aggressive company'' whose new LSW (low section width) technology in the off-highway tire and wheel business is ``ready to take the market by storm.''
``As the largest individual investor in Titan,'' he said, ``there comes a time to look at the big picture and this merger is a better way to advance Titan's goals and strengthen its outlook for the future.''
The ongoing strikes, combined with the depressed agricultural economy, have taken their toll on Titan financially. The company lost $5.3 million in the fourth quarter of 1998, and profits for the year fell to $8.2 million from $25.1 million in 1997.
Eli S. Lustgarten, an analyst with Schroder & Co. in New York, said the financial strains of the strikes and market conditions probably helped lead to the decision to merge, and Carlisle can provide strong backing for Titan projects.
Mr. Taylor said the deal was more about fit than need, however.
``Both companies are growing in their markets and want to expand,'' he said. ``And we'll each get where we want to go faster together.''
Once the acquisition is complete, Mr. Taylor will become chairman of Carlisle Tire & Wheel, currently based in Aiken, S.C. Rick McKinnish will continue as the unit's president.
Stephen P. Munn will remain Carlisle Companies chairman and CEO. The merger will give both companies the chance to cut costs and enjoy an ``enhanced global presence'' within the tire and wheel industry, Mr. Munn said in a statement.
Titan has about 25 percent of its sales in international markets, giving Carlisle a perfect opportunity to globalize, said John Barsanti, Carlisle vice president and chief financial officer.
Titan's downturn in the last year may make the acquisition seem like a risk for Carlisle, but Mr. Lustgarten said it probably is banking on Titan's huge potential.
``Carlisle is betting on Titan's future and future products,'' the analyst said.
As for seeing two more tire companies get together to help cut costs, expand and globalize, Mr. Lustgarten said it isn't surprising. ``It's really a question of `when' rather than `if' in this industry,'' he said.
While organizational plans are still fuzzy, Mr. Taylor said he expects the companies to rationalize in sales and distribution. Because expansion and growth are primary goals, however, hourly employment likely will increase, he said.
And production at Titan Tire plants in Des Moines, Iowa, Natchez, Miss., and Clinton, Tenn., as well as international operations, could be altered to meet different needs, Mr. Taylor said. Some Titan projects, such as the ramp-up at the company's Brownsville, Texas, tire plant and an expansion in Natchez, could gain momentum, he said.
``There's no question McKinnish will speed things up,'' he said. ``Lots of things will be done faster than I could have done on my own. That's what makes this a good deal, especially for the shareholders for both companies.''
Carlisle will use the next few months to decide on organizational changes and priorities, including the labor situation and production needs, Mr. Barsanti said.
Crain News Serviceer Brad Dawson contributed to this story.