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January 03, 2018 01:00 AM

Michelin, TBC combining wholesale businesses

Tire Business Staff
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    GREENVILLE, S.C. — Michelin North America Inc. (MNA) and Sumitomo Corp. of Americas (SCOA) have agreed to combine Michelin's wholesale distribution activities with TBC Corp.'s wholesale assets into a 50-50 joint venture, to be called National Tire Wholesale (NTW).

    The companies said the venture, which will be considered an operating company of SCOA's TBC business, would become the second-largest player in the U.S. wholesale tire market, combining Michelin's 85 TCi and TBC Corp.'s 59 Carroll Tire wholesale distribution locations.

    American Tire Distributors Inc. is considered the largest U.S. wholesaler, with sales in excess of $5 billion.

    Michelin will acquire a 50-percent stake in TBC Corp. as part of the deal, which includes TBC's retail and proprietary brand operations as well as the creation of the new entity NTW Wholesale, MNA Chairman and President Scott Clark told Tire Business.

    Clark

    Mr. Clark said TBC stores will remain the same and won't become Michelin-branded stores.

    "The focus for us has been increasing the size and scale of the brand offering and geographic footprint of the wholesale business through NTW," Mr. Clark said.

    "Our retail strategy will not change whatsoever. Our retail strategy has been and has always been and will continue to be to invest in our brands, invest in products, and to make our brands available across a wide variety of channels and types of customers where consumers chose to shop. And that will not change with this."

    The deal, which also includes TBC de Mexico, is subject to customary approvals and could close in the first quarter.

    This new company "will provide better availability of tire products at all price points across North America, achieving greater scale in wholesale delivery for customers," Michelin said, as well as enable the companies to enhance service quality, capacity and speed for customers.

    Erik Olsen — currently president and CEO of TBC — will continue as CEO of TBC when the transaction closes, while Don Byrd — president and COO of TCi — will become president and COO of NTW. Mr. Byrd will report to Mr. Olsen under the TBC management structure.

    Olsen

    Jim McCullough, vice president and general manager of TBC's Carroll Tire unit, will become senior vice president and national sales manager of NTW, TBC said.

    "This partnership with SCOA will better position us to serve our retail customers and ensure that consumers have access to our products when and where they need them," Mr. Clark said.

    "With this partnership, we can offer an expanded geographic footprint, a broader breadth and depth of product choices and better availability and increased delivery frequency. It will also allow us to provide better and faster service to our direct customers through an enhanced delivery service program."

    Sam Kato, senior vice president and general manager of SCOA's Auto and Aerospace Group, added: "This joint venture further supports our mobility strategy in this new, dynamic era in the automotive landscape.

    "In addition to the competitive edge this joint venture provides in the distribution arena, we believe Michelin's successful experiences in mobility services will add value to TBC. SCOA will continue to pursue investments, which support our goal of integrated mobility solutions, such as this."

    The partners said the venture will offer a number of strategic benefits, including:

    • Becoming a more competitive player in the growing North American tire wholesale and auto services sector, enabling growth in critical North American markets;
    • Combining distribution, reach and speed for satisfying the needs of online consumers more effectively;
    • Providing a foundation for coast-to-coast coverage of car and light truck service providers, addressing trends of growth in fleet maintenance and increasing complexity of service requirements and tire sizes; and
    • Increasing the companies' market share and operational scale, positioning the venture for faster growth.

    Michelin said it is contributing a cash payment of $630 million in addition to the TCi Wholesale assets to the venture to match the $1.52 billion in "enterprise value" of TBC's assets.

    TBC's retail and proprietary brands businesses are part of the venture but will be unaffected by the formation of the new venture, Michelin said.

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