Setting the stage for 2023: 7 acquisition stories that changed the game

You never know exactly what to expect.

It was expected, for instance, that 2022 would be a big one for mergers and acquisitions. And that assumption wasn't entirely wrong. Rubber industry companies headed into January with optimism, knowing that 2021 offered a return to normal and the new year could provide space to build on those successes.

And there was growth. Plenty of it. Enough to drive deals big and small.

But 2022 also brought challenges both familiar and new—war in Ukraine, inflation, supply chain snarls and labor shortages. Those pressures also played a role in some of the year's most significant deals.

Here's a look at some of the most notable M&A activity of 2022, moves that are changing the game for years ahead.

Tenneco Inc. saw a few changes last year.

Quite a few.

In February the company agreed to a $7.1 billion acquisition by private equity firm Apollo Global Management. Shareholders approved the move in June and Apollo finalized the purchase Nov. 17.

"We are excited for Tenneco to enter this exciting next chapter with Apollo and together see compelling opportunities to accelerate Tenneco's growth trajectory and enhance operations," Tenneco CEO Jim Voss said in a press release issued by Apollo the day the transaction closed. "I look forward to leading the talented team at Tenneco and serving our customers and partners around the world."

Voss succeeded CEO Brian Kessler, who had signaled he would step down once the acquisition was finalized. According to Apollo, Voss brings extensive manufacturing and management experience to the post, having spent more than 25 years in the specialty materials industry. He has served as an operating partner to Apollo Funds since 2012.

Most recently, Voss was the president and CEO of Vectra, a technology-based industrial growth company.

Rumors of the marriage between Tenneco and Apollo date back to January 2020, when Crain's Detroit Business reported that Apollo had offered $4.3 billion for the auto supplier. It was another mile marker on the rocky road Tenneco traveled as it worked to find its footing following the $5.4 billion acquisition of Federal-Mogul L.L.C. in 2018.

Shortly after the Federal-Mogul acquisition, Tenneco disclosed plans to split into two publicly traded companies—a $6.4 billion replacement automotive parts company and a $10.7 billion powertrain technology firm.

A year later, Tenneco dubbed the spin-off company Driv Inc., saying it would operate as a catalog of well-known brand names, five of which were more than a century old. The product lines would include Monroe, Champion, Oehlins, Moog, Walker, Fel-Pro, Wagner, Ferodo, Thrush, National, Sealed Power and Axios.

The aim was to spin off the company in 2020, but plans were delayed due to unfavorable market conditions.

Tenneco, which also operates the Clevite Elastomers business, is the 12th largest automotive supplier worldwide, according to Automotive News data. The company reported total global OEM parts sales of more than $15 billion in 2021.

When Holcim Group completed its $3.4 billion acquisition of Firestone Building Products in April 2021, it was easy to think of the move as an isolated acquisition.

But for Holcim, it was just the beginning.

Last year, Holcim rebranded Firestone roofing, wall and lining systems as Elevate and rolled Firestone Building Products into a newly created business unit dubbed Holcim Building Envelope. And that unit would see quite a boost from acquisitions in 2022.

Holcim purchased Texas-based Polymers Sealants North America, a former division of Illinois Tool Works in October. PSNA was projected to see net sales of about $100 million in 2022. Terms of the deal were not disclosed.

The purchase of PSNA follows Holcim's other acquisitions in the roofing and insulation space, including the purchase of Malarkey Roofing Products, which was completed in March. The addition of Malarkey brought 500 employees, two U.S.-based plants and a Portland, Ore., headquarters into the Holcim family.

From there Holcim acquired SES Foam, one of the largest independent spray foam insulation companies in the U.S., further expanding its expertise and footprint.

And the company still wasn't done. Holcim finalized Oct. 6 the acquisition of United Kingdom-based Wiltshire Heavy Building Materials, a firm that saw about $20 million in sales in 2021 and employed 80 people.

All of that is proof that Holcim has big plans for its Building Envelope division, which is expected to hit $4 billion in roofing product sales by 2025.

"And we are well on our way," Jamie Gentoso, president of Holcim Building Envelope and global head of Holcim Solutions and Products, told Rubber News late last year, noting that the business unit hoped to have around $3.52 billion in sales in 2022.

When Jim Hill, CEO of Continental A.G.'s ContiTech North American operations, served as the keynote speaker for Rubber News' biennial Hose & Belt Manufacturers Conference, he hinted that ContiTech was positioning itself for growth.

"I think you will start to see one or two announcements in the next six months that will show us actually building some facilities here to onshore some products that we make in other parts of the world today," he said. "It is well underway for us to be in the market for the market."

He wasn't kidding.

In the months since the conference, Continental disclosed some significant investments in the North American region and made some acquisitions that help it establish a strong local presence in the region and around the globe.

Most notably, ContiTech made a move to strengthen its presence in the agricultural belting space with the July 5 acquisition of WCCO Belting, a 68-year-old, family-owned company that has built a global reputation.

Terms of the deal were not disclosed.

Announcement of the acquisition came on the heels of a decision to grow hose production in North America. ContiTech in June disclosed plans for the construction of a $40 million hydraulic hose plant in San Luis Potosi, Mexico.

Meanwhile, Continental made another move in the belting space, reaching an offer to acquire mining belt supplier Gallivare, Sweden-based NorrVulk A.B. Terms of that acquisition, subject to approval by antitrust authorities, were not disclosed.

As the company realigns and right-sizes parts of its operations for optimal growth across a range of industries, there's a chance that more acquisitions could be on the horizon.

Trelleborg Group in March agreed to sell its wheels unit to Yokohama Rubber Co. Ltd. for $2.3 billion. The transaction was set to close late in 2022, but was delayed after failing to get needed regulatory approval.

The deal was—and is—a solid one for Trelleborg, which noted that the $2.3 billion price was a figure "13 times the business area's 2021 operational EBITDA, or 17.5 times 2021 EBIT." The firm also said the transaction would result in an estimated capital gain of nearly $575 million.

The deal allowed Trelleborg to grow in more lucrative markets and segments through acquisitions of its own, something it wasted no time in doing.

Moreover, with the TWS divestment, Trelleborg will improve its profitability and make its overall business less cyclical. After all, TWS accounts for 30 percent of group sales, but contributed just 22 percent of EBIT.

The divestment also will immediately improve Trelleborg's sustainability rating in the industry. The tire unit makes up two-thirds of the company's carbon dioxide emissions, and without it, Trelleborg meets its sustainability objectives for 2025 and stays on track for its 2035 net-zero vision.

For Yokohama, the acquisition is the perfect fit. It more than doubles the size of the Japan-based tire maker's off-highway tire business, significantly bolstering its ag market presence. It's an arena that Yokohama believes could offer a critical path for growth in the years ahead.

TWS also will help to balance some of Yokohama's product offerings. Of the tires manufactured and sold by Trelleborg, agricultural tires account for about 60 percent, industrial tires about 20 percent, and the remainder are tires for construction machinery and motorcycles. The company does not break down its sales by tires versus wheels.

In 2021, TWS posted $1.17 billion in sales. Yokohama's off-highway tire business, meanwhile, accounted for $977 million in sales that same year.

Adding Trelleborg Wheel also helps to strengthen YRC's commercial tire business in terms of product lineup, cost, service and digital transformation. At the same time, it boosts Yokohama's European presence, a region where it had not yet established itself as strongly as it would have liked.

Heading into 2022, Trelleborg signaled it would be aggressive on the M&A front, adding to and expanding its expertise in key growth areas. The company made good on that promise.

Most notably, Trelleborg closed on the $860 million acquisition of Minnesota Rubber & Plastics in October. MRP had sales of about $262.2 million in 2021, and it strengthens Trelleborg's North American footprint, expanding expertise and product offerings in several business areas, including specialty industrial, medical, food and beverage, and water-related infrastructure components.

In addition to MRP, Trelleborg added to its aerospace industry portfolio with the acquisition of MG Silikon GmbH. The company, which specializes in composite parts for aerospace and industrial applications, had been part of the Saint-Gobain Group.

Terms of the MG Silikon deal were not disclosed, but Trelleborg did note that company had around $11.1 million in sales annually.

Another of Trelleborg's North American-supporting acquisitions came Nov. 30, when it purchased Bochum-headquartered Innovative Sewer Technologies for an undisclosed price. In doing so, Trelleborg added to its expertise in sewer and drainage pipe rehabilitation and the manufacture of machinery, robotics and liners that are used in trenchless pipe repairs.

By adding to its capabilities and expertise, Trelleborg positions itself to provide needed sewer and pipe rehabilitation solutions—particularly in Europe and North America, where the trenchless pipe rehabilitation technology is established and being embraced.

And for Trelleborg, these acquisitions could be just the start, especially since it will have more to invest once the TWS sale is finalized.

When Russia launched its unprovoked attacks on Ukraine in February, the industry responded. Many companies stepped forward to condemn the action and offer support to Ukrainian citizens. Since then, many also have ceased operations in the country.

And the tire industry was no different.

Michelin was the first to signal it would cease operations in Russia, saying in June it would transfer operations to local management by year-end 2022. The Russian operations accounted for about 2 percent of its global sales and 1 percent of global car tire production.

Bridgestone, in October, put the for-sale signs on its own operations, saying it planned to sell off all of its assets in Russia, where it employs around 1,000. Like Michelin, Bridgestone saw around 2 percent of its global tires sales in the region.

But it was Nokian Tyres P.L.C.'s actions to end its Russian connections that have the greatest implications, reshaping the company's global operations and manufacturing footprints.

Nokian agreed in October to sell its Russian operations to Russian energy and chemicals company P.J.S.C. Tatneft. The purchase price of the "debt-free and cash-free" sale is expected to be around $400 million in U.S. funds.

Nokian's factory—located in Vsevolzhsk—employed around 975, and they produced 80 percent of the company's passenger tires. Moreover, Russia and Asia make up 20 percent of the company's global sales.

For now, Nokian has shifted passenger tire production to its plants in Finland and in Dayton, Tenn. Just this month, Nokian said it would invest $174 million to expand capacity at its U.S. plant and add roughly 350,000 square feet of warehouse space—enough to house 600,000 tires.

Meanwhile, the Finnish tire maker is working to bring needed manufacturing capacity to Europe with a $650 million greenfield plant set to take shape in Romania. Construction is scheduled to begin in early 2023, and the first tires are estimated to be produced in the second half of 2024.

Large-scale tire production in Romania is slated to start in early 2025.

Parker-Hannifin Corp., in September 2021, got approval from Meggitt P.L.C. shareholders, clearing the first of many hurdles for its $8.7 billion acquisition of the United Kingdom-based aerospace and defense supplier.

And while it took more than a year from that point, the deal closed Sept. 13, 2022. It marks Parker's largest acquisition to date.

In a related move, Parker divested its aircraft wheel and brake division, meeting a regulatory requirement to close on the Meggitt deal. Bloomfield, Conn-based Kaman Corp. paid $440 million for the unit.

Meggitt, headquartered in Coventry, England, had sales of about $2.3 billion in 2020, and it has more than 9,000 employees.

Mayfield, Ohio-based Parker-Hannifin, a motion and control technologies manufacturer, serves a range of end markets including aerospace, electronics, health care, off-road machinery, oil and gas and transportation. It recently took the No. 1 spot on Rubber News' inaugural ranking of global hose manufacturers.