NEW YORK (Reuters) – Private equity firm TPG Capital LP is exploring an initial public offering of American Tire Distributors Inc that could value the company, one of the largest U.S. tire distributors, at more than $2.5 billion, according to people familiar with the matter.
TPG has interviewed investment banks in recent weeks for roles in the proposed public offering that could take place later this year, the people said, asking not to be named because the matter is not public.
It may also evaluate an outright sale of American Tire to another company in a so-called dual track process, some of the people said.
The move to explore a listing or sale comes as the U.S. auto industry shows signs of rebounding after an extended winter.
Six of the top seven automakers reported year-over-year sales gains in April, with car sales rising 8 percent from the previous year.
Representatives for TPG did not immediately respond to requests for comment while American Tire could not be immediately reached for comment.
Founded in 1935, Huntersville, North Carolina-based American Tire is a wholesale distributor of tires, custom wheel and related tools. It operates more than 130 distribution centers in the United States and Canada.
The U.S. replacement tire market, in which American Tire is active, generated retail sales of about $37.3 billion in 2013. American Tire itself reported fiscal 2013 net sales of $3.8 billion and earnings before interest, tax, depreciation and amortization of $169.4 million.
TPG acquired American Tire in 2010 for $1.3 billion from a consortium of private equity firms that included Investcorp INVB.BH, Berkshire Partners LLC and Greenbriar Equity Group LLC. Since then, American Tire itself has acquired seven other companies.
Earlier this year, the company agreed to acquire smaller peer Terry’s Tire Town Holdings Inc for $365.6 million and Hercules Tire Holdings LLC, for $311.5 million, according to regulatory filings.
Credit ratings agency Moody’s Investors Service Inc said in March it expected American Tire would successfully integrate Hercules and Terry’s and deliver through earnings growth during 2014 and 2015, while maintaining adequate liquidity.
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