Bandag sells for $1.05B

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By Peter Rugg and Jeff Tecklenburg/MUSCATINE JOURNAL | Wednesday, December 06, 2006 |

Bandag Inc. of Muscatine and Bridgestone Americas Holding Inc. of Nashville, Tenn., today jointly announced that they have entered into a merger agreement in which Bridgestone Americas will acquire the outstanding shares of each class of stock of Bandag for $50.75 per share in cash.

The transaction is valued at approximately $1.05 billion. Bandag’s stock price jumped $5.51 per share and a separate Class A stock listing soared $11.99 per share shortly after the market opened this morning.

As of this morning, it’s uncertain how this merger might affect employees at Bandag or how the company’s operations are run.

“There are a couple of months to wait while we go through the federal regulations process,” said Martin Carver, Bandag’s president, CEO and chairman of the board, during a brief news conference this morning. “When that’s done, we’ll have to see what decisions have been made.”

Carver noted, however, that Bridgestone had committed to keeping Bandag operations in Muscatine. He said Bridgestone also committed to keeping staff salary and benefits at their current rate for one year.

The merger will not take effect until after the federal regulations have been satisfied, including a review by the U.S. Securities and Exchange Commission.

As to how the current Bandag leadership will fit into the new corporate structure, Carver again deferred until the federal process was complete. He did say that Bandag would essentially operate as a satellite company that would report to Bridgestone’s corporate office.

Carver declined to comment on how long the merger has been planned, citing his attorney’s advice to wait until the SEC’s review. Company media contact Bill Block, however, said he thought the opportunity had come after a July announcement of reorganization at Bandag to reduce its overall workforce in the United States and Canada by 15 percent and to stop offering pension plans to new hires.

“We think this is an exciting opportunity for our employees and our customers to offer up new products and innovations. Bridgestone is a great leader with years of experience,” Carver said. “For a company to make the commitments they’ve made to Bandag is, I think, pretty unusual.”

The board of directors of Bandag has unanimously approved the agreement. The transaction is expected to close late in the first quarter or early in the second quarter of 2007, subject to the receipt of shareholder and federal regulatory approvals, as well as the satisfaction of other customary closing conditions.

Certain shareholders, including Carver Partners LP and Martin G. Carver, Bandag’s chairman and chief executive officer, already have entered into separate agreements to vote their shares in support of the transaction.

Bandag is a leading manufacturer of tire retreading materials and equipment. The company has a global network of more than 900 franchised dealers that produce and market retread tires and provide tire management services. In addition, Bandag owns and operates Tire Distribution Systems Inc., a commercial retail operation that sells and services new and retread tires. It also holds an 87.5 percent interest in Speedco Inc., a provider of on-highway truck lubrication and routine tire services to commercial truck owner-operators and fleets.

In 2005, Bandag had worldwide sales of $921 million.

Following completion of the transaction, Bandag will operate as a wholly owned subsidiary of Bridgestone Americas Holding Inc.

“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,” said Mark A. Emkes, chairman and CEO of Bridgestone Americas Holding Inc., said in the joint news release. “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.”

According to Carver, “The combination of Bridgestone Americas and Bandag will benefit our dealers and enhance their business futures. The transaction combines the strength of two well-run and respected companies and will allow our dealers to go to market with an even more complete product offering.”

Officials from both companies said that the joining of the world’s largest tire and rubber company with the premier global brand in retreading is aimed at providing customers with a total tire offering, a streamlined way to manage their needs throughout a tire’s life cycle.

Bandag and Bridgestone Americas have a decades-long business relationship. TDS stores have been authorized dealers of Bridgestone Americas’ tires. Many GCR Tire Centers, units of Bridgestone Americas’ subsidiary, BFS Retail & Commercial Operations, LLC, which service the commercial and off-the-road trucking industry, are Bandag dealers.

Retreads and new Bridgestone tires are complementary, servicing different customer needs.

Retreading enables customers to get the full value of a new tire by reusing the tire’s casing again and again.

According to Emkes, the combination of the two companies 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.”

JPMorgan acted as financial adviser to Bridgestone Americas while William Blair & Company, L.L.C. acted as financial adviser to Bandag.

Jones Day was the legal adviser to Bridgestone Americas, and Foley & Lardner LLP was the legal adviser to Bandag.