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Exclusive: Investcorp comments on ATD deal

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Investcorp has no plans to take American Tire Distributors Inc. (ATD) public after buying it, Investcorp Managing Director Steve Puccinelli told moderntiredealer.com in an exclusive interview this afternoon. However, "that may be an opportunity down the road."

Investcorp is paying $710 million for ATD in cash, says Puccinelli. It also is raising an additional $750 million to pay for all expenses relating to the purchase ($550 million will be raised via senior bank debt, while $200 million is expected to be be raised via equity, he explains.)

Investcorp holds onto properties for four-and-a-half years on average, he says, then “realizes the investment” by either selling or offering an IPO.

"When we take a company public, we sell a small piece of our ownership to the public and then as the company grows, we’ll sell down the percentage of our stock.” For example, Investcorp still owns 20% of Saks Fifth Avenue.

“But if we were to do that (with ATD) it would not be for years. We want to help ATD continue what it’s been doing.”

Investcorp decided to invest in the tire industry "because it's a good industry that is not going away. We understand the industry and think ATD was the right way to invest in it."

Former Continental AG CEO Stephan Kessel and ex-Groupe Michelin executive Alain Redheuil advised Investcorp in putting the deal together, according to Investcorp officials.

"ATD and its management appealed to us. It’s a superb management team and in our minds, they do the best job" in their field. "Their business model will allow them to grow very quickly."

Investcorp is not looking at any other potential acquisitions in the tire industry. However, "ATD could acquire other distributors," similar to what it did by buying Target Tire and Big State Tire in 2004. "There are a lot of regional distributors out there."

Investcorp also has no plans to get into the retail side of the tire business. "ATD wants to be a partner to tire retailers. We don’t want to compete with our customers."

Although the contract between ATD's current owner, Charlesbank Capital Partners LLC, and Investcorp. has been signed, there are a number of details that still need to be worked out, according to Dick Johnson, ATD chairman and CEO.

Charlesbank, a private equity firm making middle-market investments in domestic companies, purchased controlling interest in the Huntersville, N.C.-based ATD in May 1999.

Investcorp's acquisition is scheduled to close next month.

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