Tire Distribution Systems Inc. is selling or has sold 25 of its commercial tire outlets and 12 retread plants in Arkansas, Louisiana, Mississippi and Tennessee in three separate transactions. The divestitures-two completed, one pending-represent about a third of the Bandag Inc. subsidiary's annual sales.
The buyers are Southern Tire Mart L.L.C. in Columbia, Miss.-owned by two principals of the former Bandag dealership that TDS had purchased in 1997 in its creation of TDS-Trans American Holdings L.L.C. in Fort Smith, Ark., a Bandag dealer since 1996, and Best One Tire/Zurcher Tire Group.
Terms of the transactions were not disclosed. Bandag did not say whether it would report a gain or loss on the sale.
The Southern Tire Mart deal includes an option to purchase 10 TDS outlets and five TDS retread plants in Texas 18 to 36 months hence, Bandag said. The revived Southern Tire Mart is led by Thomas and James Duff of Columbia, who had owned and operated the business before selling it to Bandag in 1997.
The pending divestiture-seven stores and three retread plants each in Louisiana and Mississippi to Southern Tire Mart-is on top of the recently completed sale of five stores/three plants in Arkansas to Trans American and the sale earlier this year in three separate transactions of six commercial locations, three retread plants and seven retail stores in Tennessee to Best One Tire.
In addition, Bandag/TDS last year divested seven commercial outlets, two retread plants and two retail stores in Alabama, Georgia and Louisiana in three separate transactions.
The proposed and completed divestitures reported combined sales last year of $105.9 million and operating losses of $200,000. TDS reported sales overall last year of $364.9 million, with an operating loss of $11.4 million.
Despite the recent wave of divestitures, ``Bandag is committed to TDS as it provides coverage and capabilities vital to the strength of the Strategic Alliance,'' said Martin Carver, Bandag chairman and CEO, referring to the company's nationwide fleet support program.
``Fleet customers count on Bandag to have the coverage in place to serve their tire system needs,'' he said. ``This objective is accomplished through independent dealers and TDS locations.''
For Southern Tire Mart owners Thomas and James Duff, the deal puts the brothers right back where they wanted to be all along-in charge of a growing company with a dedicated work force devoted to customer service and practicing proper financial discipline.
``We never really wanted to sell in the first place,'' Thomas Duff said, referring to Bandag's purchase of Southern Tire Mart and five other Bandag-affiliated commercial dealerships in 1997 to create TDS. ``We were always interested in getting back into the business.''
The Duff brothers worked for TDS for about 18 months after the creation of TDS in mid-summer 1997. Since then, they've improved their golf games, watched the stock market soar and crash, and got bored, according to Thomas Duff, the elder of the two brothers at 46. James is 41.
``Once our five-year non-compete clause expired,'' Mr. Duff said, ``Bandag approached us to see if we were still interested. We were and that set the negotiations in motion.''
As part of the deal, the Duffs reacquired the Southern Tire Mart name and even bought back the company headquarters building in Columbia, where their father had started the business in 1974.
The business being acquired in Louisiana and Mississippi should equate to about $60 million to $65 million in annual sales. The most important asset, though, Mr. Duff said, is the people. ``The nucleus of the work force we had in place then is still there,'' he said. ``It's a great feeling to be getting re-acquainted with them, as well as with our former customers and other industry friends.''
Parallel to re-establishing Southern Tire Mart and acquiring the stores and retread shops, the Duffs also re-established supply ties to Michelin Americas Truck Tires. TDS stores do not carry Michelin tires because Michelin severed supply ties to the tire distributor in 1998 ``for competitive reasons.'' Shortly thereafter, Michelin announced the launch of its Michelin Retread Technologies Inc. unit.
Mr. Duff said Bandag was ``fair and honorable'' throughout the negotiations, and that Bridgestone/Firestone also has lent considerable support. He declined to comment on the value of the transaction, or of the option for the Texas activities.
Southern Tire Mart's option for the Texas stores may be exercised at any time during the period beginning 18 months from the final closing of the sales and ending on a date 36 months from the final closing. Mr. Duff said he and his brother requested this option to allow them to get back into the business one step at a time. The Texas stores should add another $15 million or so in sales, Mr. Duff said.
Trans American and Bandag have been discussing their deal since last year, according to H. Lawson Hembree, president, who described the purchase as a ``strategic opportunity'' for both companies. The deal will double the size of Trans American and give the dealership capacity for up to 1,000 truck tire retreads a day at five plants.
``This deal positions us perfectly to serve cross-country trucking traffic moving coast to coast along I-30 or I-40 or from the Gulf Coast to Chicago on U.S. 71,'' Mr. Humbree told Tire Business, noting the new locations complement Trans American's existing seven stores-six in Arkansas and one in Oklahoma-well.
``This will allow us to offer a higher level of service to our fleet customers,'' he said, adding that fleets represent the bulk of Trans American's business.
Mr. Humbree and his brother Scott founded Trans American-which does business as Trans American Tire-in 1991 and added a Bandag retreading shop in 1996, switching from Goodyear at the time. Scott Humbree earlier had worked for Treadco Inc.-at that time trucking fleet Arkansas Best Corp.'s commercial tire and retreading venture-but had not gone directly from Treadco to Trans American.
Prior to founding Trans American, Lawson Humbree had been in banking, he said.
The locations acquired are in Russelville, Texarkana, Springdale, North Little Rock and Hope, the latter three of which are combination commerical stores and retread plants.
Mr. Humbree said Trans American is in the process of obtaining ISO-9001-2000 certification for its two existing plants, and will expand that process to include the new plants as soon as possible. Certifying the plants is part of the company's strategy to differentiate itself from the competition, he said.
Trans American Tire sells Bridgestone, Firestone, Goodyear, Kelly, Toyo and Yokohama new tires, he said, and now will add the Continental and General brands that TDS has carried at its locations.
Best One's acquisitions expand that growing distribution group's commercial presence in Tennessee to 11 stores, located strategically along Interstates 40 and 24 running east-west and 65 and 75 running north-south, said Paul Swentzel, president of S&S Tire in Lexington, Ky., who oversaw the acquisition on behalf of Best One, of which S&S Tire is a member. The number of locations may shrink again, though, Mr. Swentzel said, as the company consolidates new stores with existing ones in the same metropolitan areas.
The individual commercial stores acquired, in Chattanooga, Columbia, Crossville, Jackson, Knoxville, and Nashville, are operated by individual, independent dealers participating in the Best One network, Mr. Swentzel said. Best One, created several years ago by Paul Zurcher of Zurcher Tire Co. in Monroe, Ind., is part owner of each location as well, Mr. Swentzel said.
The retread plants acquired, in Chattanooga, Knoxville and Nashville, will operate under the umbrella of Premier Bandag Inc., Best One's retreading unit based in Indianapolis. Premier Bandag already is considered the fifth largest truck tire retreader in North America, producing more than 1,800 retreads a day at 12 plants before this acquisition.
Rick Skinner, Bridgestone/Firestone's commercial tire marketing executive director, has left BFS to oversee Best One's activities in Nashville, which now encompass two commercial sites, five retail stores and a retread plant. Since Best One's leading brands are Bridgestone and Firestone, the group's stores will now be the tire maker's primary presence in BFS's headquarters city of Nashville.
Mr. Swentzel said Best One had expressed an interest to Bandag/TDS in the past about the Tennessee stores, so when Bandag decided to consider divesting them, it was natural that Best One would be approached. Best One was not the only interested party, however, Mr. Swentzel said, declining to comment on any other bidders.
Bandag's divestitures last year included the sale in October of four commercial outlets and one retread plant in Alabama to McGriff Industries Inc., and two commercial outlets and a retread/commercial location in Atlanta in September to Commercial Group Inc., the Georgia commercial dealership comprising Atlanta Commercial Tire, Macon Commercial Tire, Mid-Georgia Commercial Tire and North Georgia Tire.
It also sold two retail stores in Louisiana to Delta World Tire.