MUSCATINE, Iowa—Bridgestone Americas Holding Inc. is acquiring Bandag Inc. for about $1.05 billion in a deal that will make it the largest retreader in North America.
The agreement was reached Dec. 5 at a price of $50.75 per Bandag share and is subject to shareholder and regulatory approvals, as well as the satisfaction of various closing conditions. It is expected to close late in the first quarter or early second quarter. Bridgestone will gain Bandag´s global network of more than 900 franchised dealers-including 186 in the U.S. and Canada-as well as all of its subsidiaries.
Muscatine-based Bandag´s board unanimously approved the transaction Dec. 4. The company´s stock price jumped 12.1 percent to $50.50 at the close of trading Dec. 5. Certain shareholders, including Carver Partners L.P. and Bandag Chairman and CEO Martin Carver, have entered into separate agreements to vote their shares in support of the deal.
In North America, Bandag operates five wholly owned subsidiaries: Tire Distribution Systems Inc., Speedco Inc., Open Road Technologies Inc., Bandag Canada Ltd. and Bandag de Mexico, S.A. de C.V. In Europe, it operates Bandag A.G., Bandag Europe N.V. and Bandag B.V., and in Brazil it owns Bandag do Brasil Ltda.
"Bandag is a leader in the retreading business, with a strong global reputation for quality service and technology, as well as an extensive worldwide dealer network," Mark Emkes, Bridgestone chairman and CEO, said in a prepared statement. "The joining of Bridgestone Americas and Bandag will allow the two companies to better service their customers by offering a comprehensive tire maintenance solution, backed by a complete line of new and retread truck tire offerings."
Although a leader in the North American retread business, Bandag has struggled with record high raw material and energy costs. For the third quarter ended Sept. 30, the company reported sales rose 6.1 percent while net earnings fell 50.9 percent to $9.2 million. For the nine-month period, Bandag´s sales increased 8.7 percent to $719.8 million while net earnings dropped 75.9 percent to $9.03 million. In 2005, the company posted annual sales of $921 million. It was the market leader in the truck replacement tire retread market with a 45-percent share.
Carver said Bridgestone has committed to keeping the Bandag headquarters in Muscatine. Bridgestone will operate Bandag as a wholly owned subsidiary with the chief executive reporting directly to Emkes, Carver said.
Carver will retain an advisory role with Bandag, although he said he would not retire. He said he has been so focused on getting the deal through that he hasn´t thought about or planned his future activities once his company becomes a Bridgestone Americas subsidiary. That said, Carver said he may consider running another business, though not in the rubber industry.
"Business might be one of the things I might do," he said. "I could get involved in other pursuits. I have a very broad array of interests, so I could be doing something academic, I could be doing something creative, or I could be doing all of the above."
Genesis of the deal
Bridgestone approached Bandag several months ago with an offer it couldn´t refuse, according to Carver. He said he first told Emkes that Bandag would stay independent, but he did bring the proposition before Bandag´s board of directors.
The inquiry from Bridgestone turned out to be serious, he said, and the process to sell Bandag began after the company laid off 15 percent of its work force in the summer. Along with those cuts, Bandag froze defined benefit pensions in favor of 401k plans.
A detailed timeline of the deal will be published in the final proxy statement to shareholders, he added.
Bandag employs more than 3,500 worldwide and 330 in Muscatine, according to a spokesman.
Emkes said the merger makes good business and economic sense. "Bandag´s history of success in the retread market and the similarities in the companies´ business models, distribution networks, customer base and respect for employees make this a perfect fit," he said.
How Bridgestone will integrate Bandag´s business units is unclear as the Nashville, Tenn.-based tire maker declined to comment on the subject, pending shareholder and regulatory approval of the deal. A company spokeswoman said one reason the tire maker pursued the merger is to go to market the same way its competitors do: with a full line of new tires and retread services.
"In order for us to keep pace with the market and prepare for the future, it´s critical that we take a look at our business model and continue to evolve it," she said. "When we combine our business with Bandag, we´re going to be able to better serve (fleet) customers. They´re going to get a comprehensive, tire maintenance solution, and it´s going to be backed by a complete line of new truck tire and retread offerings. That´s really the beauty of this. In the U.S. and Canada, we share a very similar distribution network."
She declined to comment on how the merger will impact Bridgestone dealers. The company also remained mum on what it will do with its Oncor mold cure plant in St. Louis after the merger is completed.
However, the spokeswoman noted that some of BFS´ GCR Truck Tire Centers use the Oliver retreading system and retread "everybody´s tires." Many GCR centers also are Bandag dealers, and TDS stores-which sell and service new and retread tires-are authorized Bridgestone and Firestone dealers.
BFS is "multi-branded in our approach to life," she said, referring to these business relationships.
GCR Truck Tire Centers ranks third among the largest North American retreaders based on annual pounds of rubber retreaded-at 15.98 million, according to data from Tire Business, a sister publication of Rubber & Plastics News. Six of the top 10 North American retreaders-not counting GCR-are Bandag franchisees.