The Trelleborg Wheel Systems business generated $1.17 billion in revenue in 2021 on the sale of agricultural tires and wheels. It generated 69 percent of its business in Europe in 2021, followed by North America at 18 percent, Latin America at 6 percent and the rest of the world 7 percent.
The sale in effect will double the size of Yokohama Rubber's off-highway tire business. Yokohama Rubber's off-highway tires business accounted for $977 million in sales last year and is a unit YRC sees as a "future growth driver."
After considering different alternatives for TWS, Trelleborg management concluded that divesting at this valuation would generate the most shareholder value and creates exciting opportunities going forward.
Trelleborg said in its Dec. 27 release 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 said the transaction will result in an estimated capital gain of nearly $575 million.
The Swedish firm said divesting TWS also will help Trelleborg improve its profitability and make its overall business less cyclical. TWS accounted for 30 percent of group sales, but contributed just 22 percent of EBIT, according to Trelleborg.