QUINCY, Ill. — Titan International Inc. plans to settle a “put option” related to its Voltyre-Prom subsidiary in Russia with a combination of cash and shares of Titan common stock, valued together at $50 million.
The situation relates to a put option exercised in mid-November by an affiliate of Russian Direct Investment Fund (RDIF), one of three shareholders of Voltyre-Prom, the Russian tire maker Titan has owned a share of since 2013.
Titan and RDIF, two of the three shareholders of Voltyre-Prom, have signed a non-binding Letter of Intent (LOI) that calls for Titan to pay RDIF $25 million in cash and issue RDIF $25 million in shares of restricted Titan common stock, Titan said, in exchange for a 10.7-percent interest in Voltyre-Prom.
This deal would increase Titan's ownership of the Russian agricultural tire maker to 53.7 percent and reduce RDIF's ownership to 25 percent.
The terms of the deal would require RDIF to hold the stock for three years, Titan said, and provide Titan the right to buy back the Titan shares from RDIF for $25 million during the three-year period.
Completion of the transaction is subject to the execution of definitive agreements acceptable to each of Titan and RDIF, Titan said. It is intended that the parties will enter into definitive agreements and consummate the transactions in the first quarter of 2019.
There is, however, no guarantee or assurance that the transaction will be consummated on the terms described in the LOI, Titan cautioned.
The LOI calls for the agreement to be executed within 15 business days following the execution of definitive agreements, Titan said.
Titan President and CEO Paul Reitz called the proposal a “solid deal” for the company's shareholders.
"This LOI, if consummated as written, removes concern about settling the put option with equity at our current stock price and would retain RDIF as a valued partner working with us to drive long-term value at Voltyre-Prom."
The put option obligates Titan to buy RDIF's shares in Voltye-Prom at a predetermined value, an obligation Titan can settle either with cash or in Titan common stock.
As stated in the original put option, the cash option would range from $74.3 million to $76.2 million, while the stock option would represent just shy of 10.2 million up to slightly more than 10.4 million shares, Titan said.
Voltyre-Prom operates a 2-million-sq.-ft.-plus factory in Volgograd, Russia, that produces agricultural and industrial tires. Capacity there is rated at 2 million tires per year, according to information released in 2013, when Titan, RDIF and One Equity Partners (OEP) bought majority ownership of the plant from JSC Cordiant.