THANE, India—Alliance Tire Group's purchase in December of most of GPX International Inc.'s global distribution assets will allow Alliance to offer its expanded customer base “compelling” value with the Galaxy, Primex and Alliance brands, the firm's CEO Yogesh Mahansaria said.
The $54 million deal—encompassing worldwide rights to the Galaxy and Primex brands; the U.S. and South African sales operations; U.S. customer relationships; warehouse footprint; and medium radial truck tire distribution business in the U.S.—will boost Alliance's annual sales by about $100 million the first year, with more than three-fourths of that derived in North America, Mr. Mahansaria said.
The Galaxy OTR and Primex industrial tire lines are almost entirely complementary to Alliance's farm and forestry tire portfolio, Mr. Mahansaria said in an interview from India with Tire Business. That opens up considerable opportunity for Alliance's existing customers to consider those brands and the new customers to consider the Alliance brands.
About 95 percent of the 1,200 former GPX customer accounts in the U.S. are new to Alliance, he added.
Alliance plans to handle the expanded portfolio by using its own plants in Israel and India along with a number of contracted manufacturers in China, Mr. Mahansaria said.
Some of the Galaxy types and sizes could be produced at Alliance's plants, he added, but for now production will continue at the Chinese producers, which have much lower U.S. import duty levels than GPX's Hebei Starbright Tire Co. plant in China.
The acquisition also strengthens Alliance's OE position, both in North America and globally, he said. GPX had OE fitments with the Galaxy brand on agricultural equipment models by Caterpillar, John Deere, Case New Holland, Volvo and others.
Alliance's revenue base in North America will be aided by the exclusive distribution agreement for the Aeolus radial truck tire brand, he noted. Although this business is outside of Alliance's traditional business model, Alliance sees it as a solid revenue and profit generator.
Asked about the price Alliance paid for the GPX assets—about $16 million more than the firm's initial bid after competitor Titan International Inc. drove up the price in an open auction process—Mr. Mahansaria said, “Different companies value investments differently. We had a global growth strategy in place, and this (acquisition) allows us to carry this out on an 'expedited timeframe.'”
Following the auction process in mid-December, Titan CEO Maurice “Morry” Taylor Jr. said Alliance had overpaid for the assets, which he claimed amounted to little more than the tire molds.
“We arrived at our own valuation,” Mr. Mahansaria said, “and determined it had 'compelling value.'”
Alliance financed the acquisition through a mix of funds from Alliance's shareholders and credit from U.S. banks.
Alliance also is making moves to shore up its business in Europe.
It recently opened a European sales office in Halsteren, Netherlands, and hired Goodyear sales executive Manuel Pintado to be president of that unit, Alliance Tire Europe B.V.
Mr. Pintado previously was head of industrial, farm and OTR tire initiatives for Goodyear's Europe, Africa and Middle East region.
Mr. Mahansaria said Mr. Pintado's experience will help Alliance establish itself more solidly as a serious player in the global off-highway tire industry.
Previously, Europe has accounted for about half of Alliance's global sales.
To facilitate growth in Europe, Alliance has regained rights to the Galaxy and Primex brands for most of western European from Trelleborg Wheel Systems S.p.A., which had obtained them from GPX in early 2009.
Alliance also expects to regain the rights for Eastern Europe later this year from CGS Group of Czech Republic, which had obtained them in its 2008 purchase of GPX's Rumaguma A.D. agricultural tire plant in Ruma, Serbia.
The Galaxy and Primex brands are still fairly new to the Asian and African markets, Mr. Mahansaria said, but one of the assets Alliance acquired is GPX's distribution company in South Africa, where he thinks there is considerable potential for all three brands.