Did National Tyre & Wheel pull a swifty with this acquisition?

The rise of electronic vehicles may be altering the dynamics of how a car is made in the future but one constant will remain – they’ll need tyres, a business that National Tyre & Wheel (ASX: NTD) is cashing in on despite being one of the more boring companies listed on the bourse.

Lodging their latest announcement at 4pm in the afternoon when other listed companies would prefer to use the timeslot to sweep bad news under the carpet, National Tyre & Wheel (NTAW) has pulled off one of the more swifty acquisitions you will see at the best of the times on the ASX.

Through their subsidiary Dynamic Wheel Co, NTAW has acquired Access Alloys for $1.12 million. Effectively a bolt-on acquisition, Access Alloys owns the exclusive distribution of the American Outlaw and ELITE Off Road brands in Australia which will transfer to Dynamic’s alloy wheel business to add load ratings and design elements not available from the existing Dynamic portfolio.

While it may not have the sex appeal of other listed companies in the M&A-heavy ASX space at the moment, the most remarkable thing about the acquisition is that Access Alloys is expected to contribute annualised revenue of $3 million and EBIT of $0.5 million.

This is quite remarkable by any standards, but exemplified by the earnings multiple of NTAW’s last acquisition when they acquired Black Rubber for $26.3m with its annualised EBITDA of $5.5 million.

So what’s the catch with Access Alloys?

“The addition of the American Outlaw and ELITE Off Road brands provides a complementary fit into our portfolio of wheel brands and we look forward to growing the distribution footprint of these products through NTAW’s national network,” said Dynamic CEO, Chris Hummer.

Perhaps the business is debt ridden? Nope. The acquisition only includes inventory, plant and equipment, intellectual property and goodwill (including the business name).

“Access Alloys will move into Dynamic’s existing premises and Dynamic will continue the employment of Access Alloys employees, except for the founders who are retiring,” said NTAW in their announcement.

Ahh there it is. Riding off into the sunset, the founders can sleep easy knowing they have left their staff in the capable hands of NTAW – the largest independent tyre and wheel importer and wholesale distributor in Australia and New Zealand.

While the author of this article may have earlier flippantly labeled NTAW as one of the more boring companies listed on the ASX, there’s nothing boring about the big year they had in FY21.

At their recent AGM, Managing Director Peter Ludeman described FY21 as a “transformational year” where the Company increased its revenue by 190% to $461.5 million. With the scaling of their business, gross profit increased from 26% to 29.8% bringing with it NPAT of $20.5m which was a 385% increase on the previous year’s $4.2m.

While the rest of the world are fawning over battery metals in preparation for the electric vehicle boom, cars will come and go but the need for tyres won’t.