Tower International to strengthen its US operations, its European operations on sale

Tower's European Operations include manufacturing facilities in Belgium, Czech Republic, Germany, Italy, Poland and Slovakia and offices in Germany and Italy.

Autocar Pro News Desk By Autocar Pro News Desk calendar 21 Nov 2018 Views icon10556 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

Tower International, a US-based leading global manufacturer of engineered automotive structural metal components and assemblies has signed a Memorandum of Understanding relating to the sale of all of its European operations to Financiere SNOP Dunois S.A.’FSD’, a privately owned French automotive supplier.

Tower's European operations include manufacturing facilities in Belgium, Czech Republic, Germany, Italy, Poland and Slovakia and offices in Germany and Italy. Financial results for full year 2018 are projected at revenue of $650 million (Rs 4,632 crore) and adjusted EBITDA of $55 million (Rs 391 crore).  Before fees and other customary adjustments, the anticipated sale price is said to represent an enterprise value of €255 million (Rs 445 crore) ($298 million at $1.17/Euro) which is an enterprise multiple of 5.4 times adjusted EBITDA. This transaction multiple is claimed to be significantly higher than the present multiple for Tower's common stock, which Tower estimates was approximately 4.5 times based on yesterday's closing price.

"This accretive transaction with FSD allows Tower to focus on its North American business with strong organic growth, profit margins and cash flow.  It further strengthens Tower's balance sheet and enhances Tower's financial flexibility and accelerates Tower's ability to invest in additional accretive growth, reduce leverage and/or return capital to Tower shareholders," said CEO Jim Gouin. "FSD and Tower Europe's operations are very complementary from a customer as well as geographic footprint.  This combination will allow Tower's assets and colleagues to be better utilised as part of this Pan-European entity."

The memorandum of understanding signed by the parties, together with an unsigned stock purchase agreement, is expected to be the basis on which the parties pursue the signing of a definitive agreement in the next few weeks, once works council consultation has taken place.  Completion of the divestiture is expected to take place during the first quarter of 2019 and is subject to the approval of the applicable antitrust authorities and other customary conditions.  Tower expects to recognise a book loss of approximately $60 million (Rs 427 crore) related to the sale of the European operations.  This one-time charge will include the reclassification of currency translation into earnings, other fair value adjustments and selling costs.

For this transaction, Rothschild served as Tower's M&A advisor, Freshfields Bruckhaus Deringer was Tower's legal advisor, and De Brauw Blackstone Westbroek advised Tower on country-specific legal matters.  Tower also received advisory services from J.P. Morgan Securities.

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