Nokian Tyres P.L.C. has bought University Wholesalers Inc. of Colchester to strengthen its wholesale distribution capacity and logistics in the strategically important North American winter tire market.
University Wholesalers, with distribution centers in Schenectedy, N.Y., and Colchester, has been a Nokian distributor for 20 years, according to Robert Hepp, the largest shareholder in the 23-year-old business. Mr. Hepp, 53, will continue to head up the company under the new ownership.
The Finnish tire maker bought University Wholesalers and its affiliate University Wholesalers of New York on Sept. 28 from Mr. Hepp and five other co-owners. Financial details of the deal were not disclosed.
Nokian had been in discussions with the owners' group for about a year, according to Mr. Hepp, who said the deal allows him to continue building the business without the burden of raising capital on his own and will allow him to ease into retirement when that time comes.
University Wholesalers-a Bridgestone/Firestone (BFS) Tire Starz distributor in Maine, New Hampshire and Vermont and a Nokian distributor for New England, New York and Pennsylvania-generated $40 million in sales last year with 40 employees.
Business with Nokian tires represented as much as half of the company's sales, Mr. Hepp said. BFS said University Wholesalers will continue to be its Tire Starz distributor for the territories assigned it.
``We've had a close, close relationship with Bob (Hepp) for quite a while,'' said Dennis Gaede, president of Nokian Tires Inc., Nokian's North American marketing and distribution arm in Nashville, Tenn. ``It's a key part of our business, and it's our intent to maximize the company's TireStarz business as well.''
Mr. Gaede emphasized Nokian Tires is not looking to get into controlled distribution in North America as it is in Europe.
University Wholesalers has just completed an expansion to its Colchester warehouse, adding 60,000 square feet to the existing 108,000-sq.-ft. structure the firm opened just three years ago. Mr. Hepp said the expansion was necessary because of increased business and the changing nature of tire distribution in general: increased demand for larger size tires means warehouses don't hold as many tires as they used to.
In addition, he said, most tire makers no longer warehouse winter tires, leaving this function of distribution up to independent wholesalers like his company. University Wholesalers also distributes tires into Quebec, Mr. Gaede said. Starting Jan. 1, Les Pneus Robert Bernard in d'Abbortsford, Quebec, will become Nokian's principal distributor for Quebec, Mr. Gaede said.
The firm's sales and profits will be consolidated into Nokian Tyres' figures starting with the fourth quarter of fiscal 2005, Nokian said. Sales this year are running about 15 percent ahead of 2004, Mr. Hepp said.
``The acquisition enables us to strengthen our sales organization and to ensure the increase of our winter tire sales in the North American snow belt area where we already have gained a strong foothold,'' said Nokian Tyres CEO and President Kim Gran in a prepared statement.
Nokian's sales in North America jumped 57.7 percent last year to $62 million on higher unit sales and a better product mix. The trend continued through the first six months of fiscal 2005 with 27.5-percent higher sales reported, putting the business on target to top $80 million this year.
Mr. Gaede said sales could grow to as much as $125 million next year as the firm gets new products and sizes into the pipeline. That would include the i3 all-weather and the Nokian WR run-flat winter tire, along with the tried-and-true Hakkapeliitta 4 and RSi winter tires, the Vatiiva light truck tire made by Cooper Tire & Rubber Co. and summer tires sourced from China.
Besides the Vermont and New York warehouses, Nokian distributes tires in North America through an outsourced warehousing operation in Indianapolis. In western Canada, Kal Tire handles most distribution.