Why Dealer Tire May Be Up for Sale, or Not Up for Sale

Bob Ulrich
Posted on February 13, 2018

A recent story by a national news organization about Dealer Tire LLC was very likely a non-story. But it sheds some light on how news items can be misleading.

The story's headline was: "Lindsay Goldberg is considering a $2 billion sale of Dealer Tire." In our industry, that would be big news. Dealer Tire sells millions of tires to car dealerships across the country every year.

There are potential problems with the story, however. First, to the best of my knowledge, Dealer Tire principals Scott and Dean Mueller own a majority interest in the privately-held company. We do know Lindsay Goldberg LLC became an investment partner in 2014 when it invested a "signifcant" amount of money in the company.

What does significant mean? At the time of the investment, Dealer Tire revealed it would use a portion of the investment to purchase the interests of TA Associates, which bought a minority stake in Dealer Tire in 2009. So the percentage of the business owned by Lindsay Goldberg was at least greater than the percentage TA Associates owned.

I doubt the Muellers ever gave up control of the company, although we can't know for sure because it is not a public company. And there is nothing to indicate TA Associates ever increased its minority interest into a majority interest.

According to the recent story, Lindsay Goldberg "agreed to buy Dealer Tire from peer TA Associates in 2014." Perhaps the writer assumed Lindsay Goldberg owned the company, or meant the firm agreed to purchase a financial stake in the company. But there is nothing in the story corroborating who owns Dealer Tire. That is crucial to the idea that Lindsay Goldberg may be putting Dealer Tire on the market.

Since Dealer Tire doesn't have to report either its financial results or the makeup of its ownership, we can't know for sure. But we can do more than just speculate. Based on following the company for nearly 20 years, and how it conducts itself in the marketplace, and what information the company has released over the years, I would say the Muellers have the ultimate say in selling the company. Until this story, there has never been anything suggesting otherwise.

Second, the story goes on to say the New York-based private equity firm "has held talks with financial advisers about strategic options for the business," which almost all companies do all the time. That's not necessarily news, and it is especially not news if Lindsay Goldberg does not own controlling interest in Dealer Tire.

Did Dealer Tire' s ownership, whoever it is, want to throw the $2 billion sales price out into the market just to see what they could get for the company if they ever decided to sell? That's possible. That's often how a company tests the waters about a sale. In this case, that could mean Lindsay Goldberg had the blessing of management to "leak" a few details of the discussion.

The information from this recent item when compared to information from past news items -- which came from Dealer Tire -- just doesn't add up at this point. Because we don't have all the details, we can't be sure whether "Lindsay Goldberg is considering a $2 billion sale of Dealer Tire" is a non-story -- or a blockbuster story.

Related Topics: car dealers, Dealer Tire, Dean Mueller, Lindsay Goldberg, Private equity firm, Scott Mueller

Bob Ulrich Editor
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