QUINCY, Ill.-Tire and wheel maker Titan International Inc. is the latest in a series of suitors hoping to buy Continental Tire North America Inc.´s Bryan, Ohio, off-the-road tire plant.
Titan announced April 24 it is negotiating with Conti to purchase the Bryan facility, which produces OTR, farm, earthmover and industrial tires. Titan officials visited the plant April 26, and the two tire makers hope to reach a definitive agreement for the acquisition within 30 days.
Quincy-based Titan, which specializes in tires and wheels for farm, construction and specialty consumer vehicles, has been in growth mode. The company-which posted net sales of about $470 million in 2005-completed the purchase of Goodyear´s agricultural tire bus- iness, including a factory in Freeport, Ill., in December. Titan estimated that deal could increase its sales by as much as $250 million.
Sales at the Bryan facility are about $125 million per year. The factory has the capacity to make 245 units per day.
The sale is subject to approval by the boards of directors at Conti and Titan, Conti´s shareholders and the appropriate government agencies. It also is contingent on contract negotiations between Titan and the United Steelworkers union, which represents the 270 hourly workers in Bryan.
Contract talks were problematic for two other would-be buyers. In January 2005, the Rosler Group, a German firm, signed a letter of intent with Conti to acquire the Bryan factory, with the deal scheduled to close by July 31, 2005.
But a successorship clause in the contract with the USW-which expires in December-dictated that a potential new buyer would have to reach a collective bargaining agreement with the hourly work force before the acquisition would be final.
Rosler´s U.S. subsidiary, Rodos Giants L.L.C., and the union were unable to get together on some big issues, including pension benefits, said John Bowling, unit chair of USW Local 890L in Bryan.
Titan formed a partnership with Rodos in August in the hope of getting a piece of the plant and gaining entry into the OTR market, but the team effort couldn´t close the deal, either.
Most recently, Pensler Capital Corp., an investment firm that owns specialty tire maker Denman Tire Corp., joined the bidding. In January, Pensler signed its own letter of intent, but its negotiations with the USW fell flat.
"We couldn´t get close to an agreement," Bowling said. "(Pensler) wanted some things we couldn´t do. We couldn´t agree to concessions with the profits we´re making here and the shortage of giant tires in the industry."
Rick Holcomb, Continental Tire North America senior counsel, said the company is optimistic this deal will move forward. More specifically, he said Titan appears confident it can negotiate an agreement with the USW.
The potential of Titan as a sole buyer makes union officials optimistic about the plant´s future as well. Ron Hoover, USW executive vice president and head of the Rubber/Plastics Industry Conference, said he likes the company´s business model for its segment of the tire and wheel market. "Let´s see how Bryan might work in this equation," he said.
Bowling said the sale to Titan is positive for two reasons. First, Titan´s experience and familiarity with the large specialty tire market is a big plus.
Second, the company´s acquisition of the Freeport plant and the operation of its Des Moines, Iowa, farm tire plant shows its commitment to manufacturing in the U.S.
"It appears Conti doesn´t want to be in the OTR tire business, and we´d much rather have someone buy us who wants us," Bowling said. "We´re interested to see where we fit in."
Titan officials didn´t meet with the union during its trip to Bryan, but Bowling said negotiators are ready to schedule meetings and start contract talks.
Bowling didn´t detail what the union members would be looking for in a proposal, but did say the five-year deal Titan worked out with the work force in Freeport would be a good model.
That contract included wage and pension increases; a guarantee of no plant closure and no more than a 10-percent reduction in production jobs during the agreement; no layoffs for two years; product protection language; preferential hire and successorship language; and a commitment from the company to make capital expenditures necessary to keep the plant competitive.
The Freeport transaction didn´t happen overnight, however. Goodyear agreed to sell the factory to Titan in February 2005, and the USW and Titan didn´t reach a tentative agreement until November. Local 745 in Freeport didn´t ratify the pact until Dec. 21, one week before the deal finally closed.
Titan is in a position to close the Bryan acquisition just weeks after its own sale to a private equity firm fell through. Last October, One Equity Partners made an offer to buy Titan shares for $18 per share.
But Jana Partners L.L.C., a private money management firm and Titan´s largest shareholder, opposed the deal, saying the offer was too low for the company´s value. On April 12, Titan announced the sale was off.
The price of Titan stock, which is traded on the New York Stock Exchange, closed April 26 at $18.55 per share. That´s a far cry from February 2003, when Titan shares dropped to 60 cents and the NYSE gave the firm six months to stabilize its stock price or face delisting.