In a deal that's billed as a ``merger of equals,'' industrial and commercial tire suppliers Galaxy Tire & Wheel Inc. and Dynamic Tire Corp. plan to form GPX Tire & Wheel by year-end.
GPX is expected to top $300 million in sales this year with more than $100 million in assets. Robert Sherkin, president of Dynamic, will be chairman of GPX as well as co-CEO with Bryan Ganz of Galaxy. The companies have not yet decided where GPX will have its headquarters.
Besides combining the former competitors with many similar characteristics, officials said, the move also will give the new company a stronger stance among Chinese manufacturers.
Mike Knorr, director of marketing for Brampton, Ontario-based Dynamic, said both companies outsource much of their manufacturing, and Dynamic is particularly focused on China. The merger, he said, would create a ``significant player'' in the market that would command more leverage and respect in a region where companies of all stripes are trying to get their products manufactured.
``What we're hoping for is that by looking at the combined entity they're going to say, `These guys are important to us, they're a very important client going forward,''' he said. ``They'll probably favor us if there's a decision whether (to) make the GPX tire or somebody else's tire right now, (they'll) do the GPX tire because (GPX is) one of (their) preferred clients.''
The deal also likely will give GPX clout for potential acquisitions in China and Europe to boost production capabilities. Mr. Knorr said future deals' arrangements could vary, but Dynamic traditionally has favored partnerships instead of outright purchases. ``It's very beneficial to partner with a strong entity in that part of the world,'' he added.
For the time being, both Dynamic and Galaxy said they don't expect major changes. Programs and warranty arrangements in place for this year will remain unchanged, and the companies don't plan to alter the pricing released June 1. The Galaxy and Primex-Dynamic's private label-brands will continue to be sold separately, meaning Galaxy dealers won't have access to Primex and vice versa.
Mr. Knorr said the companies in the next six months will look at their brand offerings and opportunities for dealers to determine if any changes are needed. He said the two product lines offer some opportunities, including a lawn and garden component from Galaxy that is missing with Dynamic, a stronger Dynamic forestry lineup and more established Galaxy skid-steer offerings.
``Really at the end of the day it's got to make a lot of sense for our customer base,'' he said.
Neil Ganz of Galaxy, who will be executive vice president of business development for GPX, said he reiterated to customers that no changes would happen immediately. ``Nothing for 2005 is going to change at all.''
While Messrs. Ganz and Knorr said the merger is fairly equal, Mr. Knorr said technically probably $240 million of the total $300 million in 2005 sales would come from Dynamic. He indicated, though, that could be misleading since the two companies are roughly equal in their off-road products, while Dynamic is buoyed by additional business such as producing private label tires and operating a wholesale division in Canada. Mr. Knorr said those extra revenue streams are likely to be retained by GPX.
``We believe that that business will continue, in fact if nothing else, it may even offer more opportunities,'' he said.
Mr. Ganz said in the end it was the companies' similarities-including culture and background-that helped the deal come together. ``(We) decided that the combination of one plus one would equal three,'' he said.