American Tire Distributors (ATD) Inc. is getting a new owner, but the change won't alter ATD's strategic direction, according to ATD Chairman and CEO Dick Johnson.
Bahrain-based global investment group Investcorp Bank BSC has bid to buy ATD outright in a deal valued at about $500 million. The deal primarily involves the 90-plus-percent ownership stake held by Boston-based Charlesbank Capital Partners L.L.C. but also will include buying out all minority shareholders.
``The growth of our dealers' businesses remains central to our success and growth,'' Mr. Johnson said. ``We aim to continue to improve our capabilities in distribution and customer service to achieve this basic strategic goal and look forward to benefiting from Investcorp's deep experience along the way.''
The deal is expected to close in late March. Investcorp will pay $710 million minus the amount of ATD's outstanding debt on Jan. 1, according to an ATD 8K filing with the Securities and Exchange Commission. ATD's net indebtedness as of Oct. 2 was $240.2 million.
Investcorp was attracted to ATD because of its management team, its focused strategy and ability to keep growing, said Steven Puccinelli, an Investcorp managing director.
``ATD is extremely well managed, and we consider it the leader in tire distribution, in helping the tire dealer become better,'' Mr. Puccinelli said.
``This is a volume-driven business,'' he said, ``and the management team is focused on having the right tires when the dealer calls.''
Charlotte, N.C.-based ATD is the nation's largest independent distributor of tires and tire-related products, operating about 80 distribution centers servicing all or parts of 35 states.
In 1999 the company-then known as J.H. Heafner Co. Inc.-sold the majority of its equity interests to Charlesbank, a private equity firm with more than $1 billion of capital under management.
Investcorp, with offices in New York, London and Bahrain, has four lines of business: corporate investment, real estate investment, asset management and technology investment. Investcorp traditionally holds investments five to seven years, Mr. Puccinelli said, although it does hold some longer.
Since its establishment in 1982, the firm has completed transactions with a total acquisition value of more than $25 billion. It now manages total investments in alternative assets of about $8.6 billion.
Investcorp has experience in the automotive aftermarket, having previously owned CSK Auto Inc., which operates more than 1,100 retail auto parts stores in 19 states under the brand names Checker Auto Parts, Schuck's Auto Supply and Kragen Auto Parts.
Advising Investcorp on the deal were Alain Redheuil, a former Group Michelin executive, and Stephan Kessel, formerly CEO of Continental A.G.
In the past dozen or so years ATD has transformed itself from J.H. Heafner to Heafner Tire Group, better reflecting its status as a national distributor and-after a series of major acquisitions-eventually ATD.
Most recently ATD acquired the inventory of Dallas Wheels and Accessories Inc. in Arlington, Texas. Prior to that the distributor bought Target Tire Corp. in September and Big State Tire Supply last April, paying nearly $66 million for the distributors that represent more than $100 million in annual sales.
Those acquisitions pushed ATD's 2004 sales to beyond $1.2 billion-about twice the sales volume projected by its largest independent wholesale rival, TBC Corp.
ATD's sales through nine months of $945.7 million were 13 percent ahead of 2003, while operating income of $42 million was 45.8 percent ahead, pushing the income/sales ratio up one full point to 4.4 percent.