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September 27, 1999 02:00 AM

TITAN-CARLISLE MERGER HITS SNAG: LETTER OF INTENT EXPIRES; TALKS CONTINUE

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    SYRACUSE, N.Y.—Though the letter of intent for Carlisle Companies Inc. to acquire tire and wheel assembly manufacturer Titan International Inc. expired Sept. 18, merger talks between the two firms are continuing. The deal has not soured, executives of both companies said, despite their agreement not to extend the Aug. 4 letter beyond its 45-day time period. That deal would link Titan with Carlisle—a Syracuse-based diversified manufacturer of products serving the construction materials, industrial and automotive components markets.

    But there may be a few potholes along the road to completion.

    Maurice ``Morry'' Taylor Jr., president and CEO of Quincy, Ill.-based Titan International, the parent of Titan Tire Corp., still is optimistic a deal can be worked out, probably before year-end.

    And while he's still set to dance with Carlisle, he told Tire Business he won't rule out considering offers from other potential suitors.

    ``We'll always entertain anything that's better for our shareholders, for our employees,'' he said. ``You have to look at everything because everybody has a stake in it.''

    Mr. Taylor said Titan will announce, in early October, a substantial agreement with a major original equipment (OE) manufacturer involving the LSW (low-sidewall) tire/wheel system it developed and has been marketing for the past couple of years. He expects that deal will enhance Titan's value and subsequently flavor the talks with Carlisle.

    ``We've been working with a number of OE's, and in late August one of the large ones made a big proposal to us. Our announcement will shake up not only our world of business, but the tire business, as well,'' he predicted.

    ``I don't see how it cannot raise the value of our company—it's not just an OE contract,'' he added without elaborating any further.

    Mr. Taylor also expressed concern that Carlisle's stock value has fallen almost 20 percent below the $49 price at which it was trading when the Titan deal was cut—and that slippage has Titan's board members, some of whom are the company's largest shareholders, troubled.

    ``They've got to talk with (Carlisle Chairman Stephen) Munn and see how he's going to get (Carlisle's) stock back up to the $47 price in the deal,'' he said. ``If it's not going to be there, (the board) can't justify selling.''

    Since the acquisition was announced, officials of both companies have inspected each other's factories, and Mr. Taylor said neither has found any surprises.

    ``There are always a few things you can improve.... But overall, I think they were real impressed. There's no doubt in my mind.''

    While Titan has completed its due diligence for the merger, he said Carlisle has yet to finish. Nonetheless, ``Steve Munn and I talked, and we decided to keep going'' on the merger.

    John S. Barsanti, Carlisle's vice president and chief financial officer, said he did not consider the acquisition dead and expected talks to continue between the companies over the next couple of months.

    `We still see it as a good opportunity for Carlisle shareholders long-term. But there are a number of things that need to be resolved,'' he said.

    Those issues include the ongoing strikes by the United Steelworkers of America that have disrupted production at Titan Tire Corp.'s agricultural tire plant in Des Moines, Iowa, and its Natchez, Miss., plant.

    However, Mr. Barsanti would not comment on several other questions, including Carlisle's assessment of Titan's factories, whether it was concerned about the approximately $250 million in debt Titan holds, or if it expects competition from any domestic or foreign tire makers that might also be interested in buying Titan.

    Mr. Taylor said he does not plan to hold out for a sweeter deal with Carlisle, and he called Mr. Munn a ``tremendous chairman and leader of that company.''

    Mr. Taylor said he's been called ``the rogue of the tire industry.'' ``I like that,'' he said. ``I think that fits me pretty good.''

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