Denman Moves in On CTNA’s Bryan OTR Plant
Pensler Capital Corp, owner of Denman Tire Corp, has signed a letter of intent to purchase Continental Tire North America’s (CTNA) OTR tyre plant in Bryan, Ohio for an estimated $75 – $80 million. The Dortmund-based Roesler Group has now backed away from the deal, despite initial interest and negotiations with CTNA and the local trade union, after being outbid by Pensler Capital. The letter of intent was reportedly signed on 16 January.
“I am a little bit amused,” Roesler Group managing director, Paul Roesler Jr told Tyres & Accessories adding: “We are pleased we are no longer first in line.” In spite of his upbeat interpretation of the situation, Roesler had to concede that the other suitor simply outbid Roesler in the race to buy Continental’s Bryan facility.
When Roesler came onto the scene, the Bryan facility commanded $55 – 60 million as the basis for purchase negotiations. But then last year when demand for OTR tyres skyrocketed, the value of the plant increased. In light of this, the Roesler group is said to have negotiated a deal with Continental boss Manfred Wennemer to pay an extra $10 million to secure the facility. However, Pensler is believed to have upped the ante by a further $15 million, an offer was obviously too good to refuse for Continental’s management. Facing the prospect of paying $25 million more than it originally intended, Roesler opted for a tactical retreat.
Instead Roesler Group walks away empty-handed, with nothing but a collection of consulting and legal bills. Paul Roesler Jr believes the drawn-out nature of his company’s negotiations with CTNA reflect Continental’s activities in North America. Last year the Bryan, Ohio plant made $10 million, none of which went to either bidder.
However, today is a new day for Roesler and now the company has new plans. While the Bryan facility would have been a good fit for Roesler Group’s operations, difficult union negotiations and significant investment would also have been required. Instead Paul Roesler Jr says his company is “looking east” in order to fill its capacity needs.
Sources indicated that Pensler is likely to treat the plant as a separate business entity, but may merge it into Leavittsburg, Ohio-based Denman in the future.
Before finalising any purchase of the plant, Pensler must still negotiate a new master contract with the United Steelworkers and its Local 890, which represents the plant. No timetable for completion of a purchase has been announced. In the event that demand for OTR tyres slows down, the new owner may find itself in charge of a plant that is profitable now, but turns out to be more expensive further down the road.