Tower International, Inc. [NYSE: TOWR], a leading global manufacturer of engineered automotive structural metal components and assemblies, today announced plans to investigate the potential sale of Tower Europe.
“The time is right to evaluate whether the sale of Tower Europe could provide significant additional value for shareholders, as well as benefitting customers and colleagues by strengthening the remaining businesses in Europe and North America,” said President and CEO Mark Malcolm.
Four key potential shareholder benefits were cited if a sale were to occur:
- Demonstrate through sum-of-the-parts valuation what the Company believes is a major disconnect between TOWR’s present stock price and the Company’s intrinsic value;
- Focus shareholders on a Tower North America business with strong growth, profit margin, and cash flow comparable to or better than other auto parts companies that have significantly higher valuation multiples;
- Result in a very strong Tower balance sheet; and
- Provide Tower the financial flexibility to invest in additional accretive growth and/or to buy back stock.
Revenue for Tower Europe is projected at approximately $650 million for full year 2015. Excluding allocated U.S. corporate cost, adjusted EBITDA is projected at about $70 million. Tower Europe is headquartered in Germany, and has a good manufacturing footprint, with factories in Germany, Slovakia, Poland, Czech Republic, Italy, and Belgium. Tower believes its European Operations have competitive cost, quality, and technology. The top ten vehicle platforms in terms of revenue include a good cross-section of customer brands, including Porsche, Mercedes, Volvo, VW, Fiat, BMW, and Skoda.
Tower North America, which is larger in size and market share than Tower Europe, is experiencing accelerating revenue and profit growth. Revenue is presently projected to grow by about 9% percent annually over the next two years, from $1.135 billionin 2015 to a projected $1.35 billion in 2017, largely reflecting previously announced new business awards. Adjusted EBITDA is projected to increase by about 24% in total during this two-year period, to $165-$170 million in 2017, representing an adjusted EBITDA margin of about 12-12.5%. Barring further organic growth opportunities, unlevered adjusted free cash flow is presently projected to increase to about 5% of revenue in 2017.
Tower anticipates that a decision to sell or retain its European Operations will be made by late First Quarter 2016. J.P. Morgan Securities LLC is acting as Tower’s adviser.
