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National Tyre & Wheel (ASX:NTD) to acquire Black Rubber

Industrial
ASX:NTD      MCAP $67.08M
02 November 2021 08:54 (AEDT)
National Tyre & Wheel (ASX:NTD) - CEO, Peter Ludemann

Source: National Tyre & Wheel

National Tyre & Wheel (NTD) has signed a deal to acquire industrial tyre retailer Black Rubber for up to $26.3 million in cash and scrip.

Based in Perth, Black Rubber operates primarily as an importer and distributor of tyres in Perth, Port Hedland, Brisbane and Sydney. Roughly 60 per cent of its revenue, however, is derived from retail activities — the sale of truck, bus and agricultural tyres to commercial fleets and other business customers.

According to the agreement, National Tyre & Wheel will wholly acquire Black Rubber from its founders, John Zelesco and Jim Raffa, for a cash payment of $19.9 million and just over 1.07 million fully paid ordinary shares at $1.12 each, worth $1.2 million.

An additional $2.6 million pay be paid based on Black Rubber’s EBITDA in FY22, and another $2.6 million based on EBITDA for the year ending June 30, 2023.

The cash component will be funded from National Tyre & Wheel’s existing cash reserves and debt facilities.

The Black Rubber acquisition is expected to increase National Tyre & Wheel’s yearly sales revenue to around $520 million, with net profit after tax and before amortisation set to increase by $3.1 million.

The deal will also give National Tyre & Wheel access to tyre recycling via three retread factories in WA, QLD and NSW, which the company said will deliver a boost to its sustainability credentials, particularly as the demand for recycled products increases.

“Tyre retreading will fill a gap in our product portfolio and we look forward to offering this important category to our customers,” National Tyre & Wheel CEO Peter Ludemann said.

“It is also a significant step in our ongoing mission to be a more sustainable entity.”

Upon completion of the acquisition, John Zelesco will remain as CEO and a Director of Black Rubber while Jim Raffa will remain involved as a consultant. As such, Mr Zelesco and Jason McCabe, General Manager of Black Rubber, will execute new employment agreements as part of the transaction.

“We are very strong on delivering value adding services to commercial customers and retread manufacturing, but we need a national footprint and other resources to grow substantially beyond WA,” Mr Zelesco said.

“Access to NTAW’s national footprint and shared services will provide the impetus we need to achieve that growth.”

National Tyre & Wheel was up 6.55 per cent at the close of trading on Tuesday to $1.22 per share.

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