Titan International Inc.'s largest shareholder is not satisfied with the $18-a-share offer from One Equity Partners LLC to buy the company.
JANA Partners LLC, with beneficial ownership of 14.8% of the company's stock, has called upon the Titan board of directors to respond to its demand that the board either deliver a higher price for shareholders or offer "adequate assurances that such offer represents the highest and best price obtainable for shareholders via a full and open process."
JANA also put the board on notice that shareholders would likely reject an offer at this price should the board fail to demonstrate it is delivering maximum value for shareholders.
In October, One Equity Partners, a private equity affiliate of JPMorgan Chase & Co., offered to acquire Titan in a cash merger. One Equity manages $5 billion in investments for JPMorgan in direct private equity transactions.
A member of Titan's board, Richard Cashin Jr., also is One Equity's managing partner.
"The silence is deafening," said JANA Managing Partner Barry Rosenstein in a letter sent to the board. "To date, the board has not made even a token effort to address our concerns. The failure of the board thus far to explain their reasoning or to provide assurances that they have and will continue to make every effort to pursue the highest possible price for shareholders, combined with our continued belief that the proposed $18 per share price significantly undervalues the company, means that we will continue to oppose this transaction at the current price.
"We also believe the circumstances suggest that there is an uncomfortably close connection between the proposed buyer, One Equity Partners LLC, and the board, including the fact that an officer of this proposed buyer is also a member of the board and that other board members, including President and CEO Maurice M. Taylor, may participate in the transaction."
Mr. Rosenstein pointed to a number of factors that have caused JANA to continue to believe the proposed share price fails to fairly value Titan. They include the following:
* JANA's belief that the proposed price does not reflect the full value to Titan of the purchase of Goodyear Tire & Rubber Co.'s North American agricultural tire business. JANA notes that the closure of this transaction appears even more likely now than it did in October, when JANA first raised the issue, emphasizing JANA's concern that the board appears intent on striking a deal whereby One Equity can secure a price that does not reflect the full anticipated value of the Goodyear acquisition only shortly before its expected closure.
* that the stock price of one of Titan's significant customers, Deere & Co., has increased by almost 17% since October 12, 2005, the day after One Equity's offer was announced. According to JANA, this indicates that Titan's stock would have risen during this period as well, particularly given that the outlook for North American agricultural equipment sales continues to be strong in general, were it not being held down by One Equity's low bid.
* that Titan Europe, in which Titan holds a minority interest, saw its stock price increase by more than 15% in the days following a recent acquisition announcement. JANA believes this suggests that were it not for the proposed sale to One Equity at $18 per share, Titan's share price similarly would see the benefit of this acquisition by Titan Europe.
"While the board appears confident that they can push this deal through to signing without addressing the concerns we have raised, we put you on notice now that absent adequate assurances that this deal represents the highest and best price obtainable for shareholders via a full and open process, or an increase in the proposed offering price to a level which clearly reflects fair value, we intend to vigorously oppose this transaction," Rosenstein said in a letter to the board.
"The Board may be driving the process at this stage, but the company's shareholders will have the final say, and we are confident that should the board fail to demonstrate that it is delivering maximum value for its shareholders, this transaction will be rejected."
JANA Partners LLC, a Delaware limited liability company, is a private money management firm that holds the common stock of the company in various accounts under its management and control.
Titan's stock price on the New York Stock Exchange closed at $17.18 on Friday, Dec. 16. That compares to a 52-week high and low of $18.17 and $12.30, respectively.
