Danaher Corp., a Washington-based manufacturer of automotive and other industrial products, yesterday announced plans to sell Mohawk Rubber Co. for $70 million.
Mohawk's management is acquiring the company in a leveraged buyout with the assistance of McKinley Allsopp Inc., a New York investment banking firm.
Under the terms of the buyout, the investor group will pay $67 million in cash and trade $3 million in preferred stock to close the deal. The group also agreed to assume $5 million worth of Mohawk's industrial revenue bonds.
The sale, which is expected to be completed by the end of the year, is part of Danaher's strategy to reduce the debt it took on when it acquired Chicago Pneumatic Tool Co. and Western Pacific Industries last year.
"We definitely wanted to make some substantial debt reduction, and we will have accomplished that with the sale of Mohawk and another company earlier this year," said Mitchell P. Rales, Danaher president.
Danaher in April sold portions of Chicago Pneumatic for $85.5 million in cash to cut its debt.
Rales called Mohawk "a good business," but said the Ohio manufacturer of car and light-truck tires no longer fit into Danaher's strategic plans. Danaher's goal is to build itself as a high-profile manufacturer of automotive, industrial and other plastic and rubber products, Rales said.
But Mohawk is competing in a high-cost industry against U.S. rubber giants like Goodyear Tire and Rubber Co. and B.F. Goodrich Co. and, increasingly, against Japanese companies like Bridgestone Corp., Rales said. Mohawk "doesn't have dominant name recognition; and we don't control the pricing in that segment," Rales said.
Bruce Zenkel, McKinley Allsopp's managing director, termed the sale "a very positive transaction." It marks the first time that Mohawk's managers actually will own and operate the company, Zenkel said.