CHARLOTTE, N.C. (July 23, 2004) — For several years Dick Johnson, chairman and CEO of American Tire Distributors Inc. (ATD), has eyed Texas as a crucial market where the wholesaler lacked a significant presence.
After much pursuing of Texas Market Tire Inc.—better known as Big State Tire Supply—Mr. Johnson finally has hooked a Lone Star State distributor that fills the gap ATD had between its distribution centers in Tex-arkana, Ark., and Phoenix. ATD reached an agreement July 2 to acquire Big State and its nine distribution centers servicing more than 2,500 accounts in Texas, Oklahoma and New Mexico. Financial terms were not disclosed.
The purchase places ATD in 38 states supplying more than 42,000 points of sale and brings the management talents of Big State founders Mel Shook and Jerry Hale—who will stay on to manage operations in their tri-state area—under the Charlotte-based wholesaler's umbrella.
“I looked throughout the whole marketplace and this company was the right company for us,” Mr. Johnson said. “The culture is the same, and that's very important to us. I like everything about the way they go to business, and it's very similar to ours.”
“If you were to go into one of their distribution centers and watch operations, we probably come as close as two companies can come to operate the same way,” Mr. Shook said. “I think that's a good thing from our employees' standpoint and our customers' standpoint because it will have very little adverse impact on our customers.”
Mr. Shook, declining to disclose his company's sales, said he and Mr. Hale never considered selling their business, which they founded 24 years ago, to anyone else. But ATD was a “perfect fit” because the company's values matched their own. And at age 48, Mr. Shook insisted he didn't sell in order to retire.
“Dick's gone to us in the last five years about doing something, and the timing was the perfect timing,” Mr. Shook said. “Business is all about timing. We weren't looking to get out. It's a match between us and ATD that I felt was a perfect match.”
Titles of responsibility for Messrs. Shook and Hale are still being developed, though Mr. Shook joked that he “will continue to empty the trash cans and sweep the floors.” Mr. Johnson shot back with some ideas for new titles for the men.
“Mel asked that I call him 'king fish,'” Mr. Johnson joked. “Jerry will be called 'the big kahuna.'”
Pretensions aside, Mr. Johnson said ATD will expand the size of Big State's distribution centers and add trucks and drivers, responsibilities that Messrs. Hale and Shook will share.
“We're going to have to continue to build the sales and train the entire sales force on a new computer system, but then also train them on new products that they haven't sold in the past,” he explained. “(Mel) has got a lot of work to do.”
Mr. Johnson noted that with Big State under its belt, ATD can concentrate on expanding its distribution in all the central states north of Texas and in Missouri and Kansas. ATD has distribution centers in Springfield, Mo.; Des Moines, Iowa; Lincoln, Neb.; Sioux Falls, S.D.; and Little Rock and Texarkana, Ark. Big State's centers are located in Lubbock, McAllen, Amarillo, San Angelo, Carrolton, Tyler and San Marcos, Texas; Albuquerque, N.M.; and Oklahoma City.
“There's a lot of area up through that central part of the country that's available to us and that certainly we'd like to be in,” Mr. Johnson said, adding that one of ATD's goals is to double its annual sales to $2 billion. He also mentioned the Chicago, Denver and Salt Lake City markets as potential growth opportunities, along with Minnesota and Indiana.
He said he believes ATD can expand the Texas market through its wheel and equipment business, as well as by adding tire brands Big State presently doesn't carry. Big State was one of the first wholesalers to introduce Goodyear's G3 concept, and Mr. Shook said ATD—which already has the G3 program in 30 of its distribution centers—will keep and grow the program out of the newly acquired Big State centers. He said Goodyear has shared in the two companies' excitement over the deal.
ATD will keep the Big State name for a period of time to ease the transition, according to Mr. Johnson. He said he wasn't sure now if all Big State employees will stay on with ATD, but he said he's comfortable with “a high 99 percent.”
One of ATD's distribution competitors said he was surprised by news of the acquisition of Big State but not of ATD's expansion into Texas.
“We were surprised, but we're not surprised,” said Pat McLaughlin, executive director of St. Peters, Mo.-based dealer buying group SURE Tire Co. Inc. “It's something that we knew they were on the march doing, whether it was Big State or another individual. We knew they were on the hunt. They're looking to close their open markets just like we are.”
Mr. Johnson said what matters most to him beyond growing ATD is maintaining the company's integrity and carrying out its promises, no matter the cost.
“At the end of the day…I just want everybody to say that American Tire Distributors is a tough competitor but the one thing we have more than anything else is integrity. I think that's extremely important.”