LINCOLN, Neb. (April 21, 2000)—General William Tecumseh Sherman had his "march to the sea." The Heafner Tire Group´s been there, done that.
"General" Donald C. Roof, Heafner´s president and CEO, had a different piece of geography in mind when the company signed an agreement April 20 to acquire the Nebraska-based T.O. Haas Tire Co. It is yet another in a series of mega-mergers that have become relatively commonplace in the continually consolidating tire industry.
"They fill in a very nice piece of geography for us," Mr. Roof told Tire Business while on his way to Lincoln to finalize a deal that will bring the T.O. Haas empire into Heafner´s ever-expanding fold.
For Haas—primarily a wholesale distributor that turned sales of $104 million last year—that includes one retread plant, 30 retail stores and four distribution centers covering Iowa, Nebraska, Kansas, Wyoming, Colorado, the Dakotas, Minnesota and Oklahoma.
The deal gives Heafner long-sought coverage in most of the Plains states. It also provides a central passageway across the country between its Heafner-ITCO Tires & Products in the Southeast and, on the West Coast, its Competition Parts Warehouse, Winston Tire and California Tire operations, most of which have been acquired by Charlotte, N.C.-based Heafner over the past few years.
In a prepared statement following the merger announcement, Mr. Roof called Haas "the premier distributor of tires and related products in the central part of the country since its founding in 1947 by T.O. and Terry Haas.
"This heritage was carried on by their sons and principal shareholders, Randy and Rick Haas. The entire Haas organization has an excellent reputation and is well known for the quality of its products, customers, services and employees."
When the buyout becomes official, after a 30-day incubation period pending regulatory approval, Randy Haas will still be president—but of the Heafner Tire Group´s T.O. Haas Division—and will serve on Heafner´s executive committee. Financial terms of the transaction were not released.
The Haas organization is more than just a wholesaler, Mr. Roof explained. "They´re a program distributor like we are. They really believe in strong relationships with the manufacturers, as we do, and the small, independent tire dealer-type of customer service we do.
"From a business standpoint, they´re a perfect match, as is the philosophy of how they approach the market."
Mr. Roof said Heafner is hoping the transaction will continue to reinforce its relationships both with independent dealers and with tire manufacturers, since Haas is a big Bridgestone/Firestone Inc. (BFS), Michelin North America and TBC Corp. customer. "It´ll strengthen us with BFS and Michelin and, indirectly, with Goodyear, because it´s such a big supplier to TBC."
Although Heafner asked Haas to the dance, Mr. Roof added that "we´ve talked with just about everyone in the industry—with all the players that are out there."
While a main reason for buying Haas had to do with the geography, "if you talk with some of the manufacturers," he said, "T.O. Haas has a very solid reputation.... When you look at that part of the country, Haas was at the top of our list."
Heafner will now service all or parts of 34 states. "If we want to truly be a national distributor, we have to get national," Mr. Roof acknowledged. "So this is our first big movement out of the Southeast and West Coast, and takes the Plains states into our sphere of influence."
Commenting on the merger, Randy Haas said he and the rest of the dealership´s 480 employees are "looking forward to working with the Heafner organization."
The dealership´s entire work force and management team will remain intact.
The transaction, he told Tire Business, "adds some stability to our organization as we go forward and helps us with our plans for expansion."
It also will strengthen the company´s ability "to serve our customers and to expand our distribution operations," which will be enhanced by access "to Heafner´s extensive dealer programs and capital strength."
Haas, in fact, has been in an expansion mode itself.
Last November it acquired Tri Sons Service, a commercial tire and service outlet in Omaha, Neb., in order to provide more coverage and service opportunities in that market. Haas also opened eight new retail stores last year—several by acquisition, including its first Big O Tires Inc. franchise, when it took over an outlet in Lincoln that had not been doing well.
Mr. Haas said the dealership has no specific targets in its sights for this year, but will "consider all opportunities in the marketplace."
"The availability of capital is one of the benefits Haas will get out of the deal," Mr. Roof noted, "because it´s been looking to aggressively grow in the central part of the U.S."
For Heafner, the money spigot opened wide in mid-1999 when it sold the majority of its equity interests to Charlesbank Capital Partners L.L.C., a private equity firm. Then last month, Heafner increased its revolving credit line to $200 million—up from $100 million—with its five major lenders, including Fleet Capital, First Union and Bank of America.
More expansion is not out of the question for Heafner.
Mr. Roof said the company is "continuing to have discussions" about acquisitions in other areas, including its desire to gain a foothold in Texas, which would provide a southern link across the country for its distribution.
The company also plans to look more seriously at "greenfields," that is, moving into new areas, and expects to use Haas as a springboard. Last month its California Tire Division opened a warehouse in Carson, Calif., its first such greenfield expansion in a few years, and Mr. Roof expects Heafner may have at least one more to announce by year´s end.
In 2001, he predicted, "you could see Heafner move into several additional states as we fill out our market coverage."
One of the country´s leading independent marketers of tires and related products, Heafner had sales last year in excess of $1 billion. It operates more than 60 distribution centers and 210 retail tire and auto service stores.
Haas, on the other hand, has come a long way to be part of such a large, growing conglomerate.
When the dealership started out, it had only one new-tire line, a vulcanizer, and the reputation of its namesake and founder, T.O. Haas, who grew the company to become a dominant player in the Plains states. Though he retired more than 20 years ago, Mr. Haas, who´ll be 85 next month, is company chairman and still acts as a "goodwill ambassador."
One of the "elder statesmen" of the tire industry, Mr. Haas was the 1997 recipient of the "Tire Dealer Humanitarian Award," presented annually by Tire Business to an independent dealer or retreader who is making a difference in his or her community.