Titan acquires Carlstar Group

Titan International Inc., a global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, has acquired Carlstar Group LLC for approximately $296 million in a transaction consisting of cash and stock, which closed  February 29.

Based in Franklin, Tenn., Carlstar is a global manufacturer and distributor of specialty tires and wheels for a variety of end-market verticals including outdoor power equipment, power sports, trailers, and small to midsize agricultural and construction equipment. Last summer, the Carlstar Group began to transition its products that carried the Carlisle brand to “Carlstar.”

The acquisition of Carlstar adds four manufacturing facilities to Titan’s footprint: Aiken, S.C.; Jackson and Clinton, Tenn.; and Meizhou, China. Carlstar also internally manages twelve distribution facilities in North America and Europe. Its global 2023 revenues were approximately $615 million.

For Titan, Carlstar is expected to bring new customer relationships in multiple channels, including leading wholesale distributors, national retailers, commercial servicing dealers and OEMs. The combination of the two companies will create what Titan said is the largest pure play specialty tire manufacturer covering commercial and consumer end markets.

Carlstar tires were originally branded Carlisle. (Illustration: Carlstar Group)

“This is a transformative deal for Titan as it expands our manufacturing and distribution footprint while also further diversifying our product portfolio and key customer relationships, making Titan a ‘one-stop shop’ within the specialty wheel and tire space,” said Paul Reitz, president and Chief Executive Officer, Titan, West Chicago, Ill. “Carlstar’s exciting catalogue of products are utilized primarily by consumers, which is a much different market than ag. In outdoor power equipment and power sports, Carlstar wheels and tires can be found on products such as ATV/UTVs, lawn mowers and golf carts. Their tires can also be found on high-speed trailers where performance is a key differentiator. In the ag market, Carlstar products are typically found on equipment such as backhoes and small skid-steer units, giving Titan a best in class offering.

“I have spent a significant amount of time visiting Carlstar’s plants, and meeting their people, and we can tell you that Carlstar is a well-run business, on a good trajectory, and we expect that success to continue under Titan’s ownership. While there is not a significant overlap in the legacy Titan business and Carlstar from a product and manufacturing capability standpoint, we expect to achieve sizeable commercial and operational synergies, as we combine these organizations. We are looking forward to sharing more specific information with the shareholder community on our expectations for this transaction, and our plans for the expanded Titan, in the coming months.”

Carlstar was majority owned by investment funds affiliated with American Industrial Partners Capital Fund V.

Titan International also announced its fiscal year 2023 financial performance results:

“Net sales for the fourth quarter ended Dec. 31, 2023, were $390.2 million, compared to $509.8 million in the comparable quarter of 2022. Net sales change was across all segments and primarily driven by sales volume decrease caused by elevated inventory levels at our customers in the Americas, particularly OEM customers, lower levels of end customer demand in small agricultural equipment, and economic softness in Brazil. Net sales change was also impacted by negative price, primarily due to lower raw material and other input costs, most notably steel, and unfavorable foreign currency translation of -2%.

“Gross profit for the fourth quarter ended December 31, 2023, was $58.3 million, compared to $76.7 million in the comparable prior year period. Gross margin was 14.9 percent of net sales for the quarter, consistent with 15.0% of net sales in the comparable prior year period. Margins were maintained as a result of lower production input costs and continued productivity initiatives across global production facilities, despite headwinds from the unfavorable impact of fixed cost absorption on lower revenue.”

In regards to market conditions within Titan’s segments, Reitz said in a statement: “... Commentary from large, global agricultural equipment companies through the first two months of 2024 is consistent with what we are seeing in the field and hearing from our customers, namely that demand is somewhat soft due to declining farmer incomes. On the other hand, inventories appear to have normalized, which is a positive allowing for a more direct connection between commodity prices and equipment demand, including both new and aftermarket, as we move through the year. Over the longer term, the continued adoption of precision farming represents a positive demand driver and farmers are also increasingly cognizant of the ability of our tire technologies such as LSW to deliver meaningful additions to their bottom lines. The construction and earthmoving markets, particularly non-residential construction projects, have the tailwind of infrastructure support and the transition to clean energy is expected to support commodity prices of key inputs such as rare earth elements, which will benefit the mining segment over the long term.”