LAVAL, Quebec (Aug. 22, 2005) — Current managers have bought the President Tire Canada subsidiary from A. Picard & Sons Inc., forming a new company with both franchise and company-owned retail arms that officials want to extend across all of Canada.
Denis Monette, director general of President Tire since 1997, is president and CEO as well as main shareholder of the holding company Group President. It oversees two divisions: President Tire Canada Inc., the wholesale and franchise arm; and President Auto Centre, a network of company-owned retail stores. A. Picard & Sons previously formed Group President as a holding company between founder Antoine Picard and his children, but that unit was reformed in its current state by this deal.
Other company managers participating in the deal, whose terms were not disclosed, are Daniel Picard, Marcel Richard, Patrick Larochelle and Dennis Marshall.
The firm's franchise and wholesale arm is clearly the dominant force with about 230 franchises under the President Tire banner. But Mr. Monette said the retail division—made up of the 17 former Sears auto centers President Tire acquired last year in Quebec and the Maritimes—will see the most immediate growth.
“We're going to be growing these two companies together by increasing the retail and trying to maintain and increase the wholesale as well,” Mr. Monette said. “We can bring the two divisions probably kind of equal.”
The group overall is on track to post 2005 sales of about $100 million (Canadian), and Mr. Monette wants to hit $150 million within five years. This year the wholesale side accounts for about $65 million in sales, and the retail contributes about $30 million.
The franchise owners can expect little changes in the immediate future, he said, except for potential service enhancements. It's in the retail arena that President Tire will have a large appetite—though he added the company still would look for independent dealers who want to join the franchise ranks.
“Within I would say 12 months, 18 months from now we're going to be fully into an acquisition mode in order to go get market share by acquiring some divisions or some stores,” he told Tire Business. “As you know, everyone's for sale once in awhile, so we have to be there at the right time and make sure that we have the right deal.”
The immediate targets of that plan are Toronto and Vancouver, British Columbia. Then President Tire will look to other major cities, including Calgary, Alberta and Regina, Saskatchewan. President Tire is well established in Quebec and the Maritimes, with growth expected most from Ontario to Western Canada. The company has no presence in Manitoba or Saskatchewan.
The potential targets of this acquisition plan, though, are in flux. Mr. Monette said the right stores depend on the specific market, such as in Manitoba, which has a total population of only 600,000. “We have to be in the main cities,” he said. “No doubt. What's there, what's available is a different story.”
But while President Tire seeks this company-owned retail growth, Mr. Monette said he will be very careful about competition issues with the company's franchise owners. He said separating products and offerings will be key, but nothing will be foolproof. “There's always somebody that will compete against his own network,” Mr. Monette said.
He added that competition is inevitable with seemingly everyone selling some of the same flag-brand tires. “These products are floating anyway from all sorts of sources, so it's irrelevant at that level,” he said. “But yes, you have to be careful.”
President Tire's own retail stores may actually help its franchise stores in some markets, he said, by refusing to play the price game and thereby helping to raise dealers' margins a few points.
“We don't want to compete on price, we want to compete on service only,” he said.
As the retail side begins its growth push, the wholesale side also will have some daunting questions to answer. For the company that prides itself on service, President Tire has to determine whether it will cater to smaller dealerships that order smaller quantities more often or else take the lead of the large distributors and tire makers who turn away the less profitable orders.
“But for us to give them the service is becoming out of proportion” as President Tire gets bigger, he said. President Tire does sell wholesale to dealers outside its network, but that's a small portion of its business.
As President Tire begins these new endeavors, the formation of the new company itself marks a personal accomplishment for Mr. Monette. As head of a family business that the founder intended to keep in the family, Mr. Monette said he seriously entertained an offer from outside of the tire industry two years ago. But while he decided to stay in the industry he'd called home for more than 30 years, he began to think of the possibility of buying President Tire and sought help from banks.
Mr. Monette started his career managing a garage in Laval, competing against Daniel Picard, who was working for the family business. The two became friends and, when Mr. Monette went to work for various tire makers, the Picard business remained one of his largest customers. That closeness with the Picard family—plus Daniel Picard's involvement with the new company—made the deal easier for Antoine Picard, who wished to retire. Three of Antoine Picard's grandchildren also work for the new company.
“Antoine had always considered me as a son basically,” Mr. Monette said.