FdG Associates completes purchase of Hercules

May 10, 2005

FdG Associates, a New York City-based private equity firm, finalized its acquisition of Hercules Tire & Rubber Co. this morning. FdG is now Hercules' majority shareholder.

The rest of Hercules' shares are owned by the Findlay, Ohio-based company's management team, Hercules CEO Craig Anderson told moderntiredealer.com.

Anderson did not provide a percentage breakdown, nor have FdG or Hercules disclosed dollar amounts, but he did concede that FdG owns "a substantial majority."

Anderson says Hercules' 33 dealer/shareholders voted to approve the transaction earlier today. All of them have agreed to tender their shares.

The acquisition -- which was officially made by FdG Capital Partners II LP, FdG's second institutional fund -- "will provide Hercules (with) the financial base to further develop its Hercules branded private label program, solidify its industry position and capitalize on opportunities for growth and acquisitions," according to FdG officials.

Hercules' existing management team will continue to run the company's day-to-day operations, according to Anderson.

"Our new partnership with FdG will provide Hercules with the additional resources necessary to develop and expand our product offerings and distribution platforms worldwide.

"With this financing, the company is well-positioned to capitalize on growth and acquisition opportunities."

Anderson says that Hercules' relationships with customers and suppliers will remain unchanged.

"We will continue to focus on the private label, nationally known independent tire brands, and niche performance products for which our customers rely on us.

"Private brand dealer agreements covering Hercules and Merit brands will be honored and will remain in place, and additional dealers are being sought in open territories."

Mark Hauser, managing director for FdG Associates, says the equity firm's purchase of Hercules "is consistent with our philosophy of partnering with strong management teams to execute their strategic plans.

"We look forward to working with management to solidify Hercules' leadership position in the tire industry and create additional opportunities for growth."

As part of the acquisition, Larry Seawell has been promoted from senior vice president to president and COO of Hercules. In addition to CEO, Anderson also will serve as vice chairman.

"We're going to maintain that position through the end of the year," says Anderson. "Then at that point in time Larry will step up and I'll work more with the board of directors."

Steve Buck, Hercules' general manager and vice president of its tire division, "will stay with us and work with (our) dealers through the transition. And probably within the next six to 12 months he'll be looking at retirement on his terms."

No management changes have or will be imposed by FDG, according to Anderson. "We brought (plans) to them and said, 'Here's the way we want the organizational structure to work.'"

Hercules -- which was founded in 1952 -- operates 12 distribution centers throughout the United States, Canada and China that maintain inventories of more than two million units.

Its divisions include an export arm called Treadway Exports and wholesale units Tire Dealer's Warehouse and Tire Specialists. Hercules also has an Asia Pacific unit.