Investcorp, Charlesbank swap tires for $700m

The global investment firm has acquired American Tire Distributors, a portfolio company of Boston private equity sponsor Charlesbank Capital, in a deal valued at approximately $700m.

Global private equity firm Investcorp announced today that it has agreed to acquire American Tire Distributors, an after-market tire distribution company, from middle market sponsor Charlesbank Capital Partners. According to industry sources familiar with the transaction, the deal was valued at approximately $700 million (€548 million), or 8.75 times pro forma EBITDA.

According to Steven Puccinelli, a managing director of Investcorp, Bank of America, the sell-side advisor to American Tire, will lead financing for the transaction including a senior debt tranche and a high-yield note offering.

Charlesbank originally acquired the business in 1999, investing $45 million of equity. According to Kim Davis, a managing director of Charlesbank, an additional $34 million of equity was invested to fund the company's add-on acquisitions and support a recapitalization of the business. Based on two acquisitions which the company recently completed, American Tire is expected to generate pro forma sales and EBITDA of $1.4 billion and $80 million, respectively.

Puccinelli noted that the company will continue to pursue growth through acquisitions as the industry remains fragmented with a number of regional players scattered across the country.

Investcorp has previously invested in the automotive aftermarket, through its ownership of CSK Auto, an aftermarket auto parts retailer that the firm acquired in a 1996 transaction reportedly valued at $500 million.

Puccinelli noted that Investcorp was aided in the transaction by two of the firm's eight advisory directors, Alain Redheuil and Stephan Kessell, who have previous management experience at tire companies Michelin and Continental, respectively.

Investcorp, established in 1982, currently manages total investments in alternative assets of approximately $8.6 billion. The firm is publicly listed on the Bahrain Stock Exchange but has offices in London and New York.

Charlesbank Capital was founded in 1998 as the successor firm to Harvard Private Capital Group. The firm is currently investing its fifth fund, Charlesbank Equity Fund V, which closed on $590 million in 2001. The investment in American Tire came from the firm’s previous fund.