organised retail in tyres: global examples

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Organised Retail in Tyres: Global Examples

Sector: Retail

Sep 2013

Index

US 3

Europe 12

ROW 16

Transactions 20

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US

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Discount Tire (unlisted)

• Started in 1960

• Claims to be the world’s largest tyre retailer, with over 850 stores

• The company remains privately owned

• Has stuck to the knitting – sells only tyres and accessories like alloy wheels

www.indiabusinessreports.com 4Global Tyre Retail

1 7 36

209

418

790850

1960 1970 1980 1990 2000 2010 2013

Store Count - Discount Tire

TBC Corporation (was listed, now acquired)

• Traces origin to 1956, then called Cordovan Associates.

• Cordovan Associates changed its name to Tire & Battery Corporation in 1972

• Brands include Tire Kingdom, National Tire and Battery, and franchised stores under Big O Tires. Has close to 850 outlets

• Markets and sells nine proprietary brand of tires

• Also does tyre distribution through Carroll Tire wholesale distribution centers, where it markets to independent tire dealers across the United States.

• In 2005, TBC Corporation was purchased by Sumitomo Corporation of America (SCOA) in a $1.1bn transaction


Les Schwab (unlisted)

• Started in 1952, in Pinedale, Oregon

• Close to 450 stores, present in nine states in Western USA

• Employs 7000+ people, highly regarded for its employee friendly policies

• In addition to tires, the company sells a variety of other auto parts and auto related services, including brakes and shockers.

• Privately held

• Revenues reportedly around $1.6bn


Monro Muffler Brake and Service Inc (listed)


• Started in 1952, listed in 1991

• 935 stores in 22 states, of which, 397 tire stores are tire stores, and the rest are service stores

• Has the following business areas: Tyres (42%), Maintenance (29%), Brakes (15%), Steering (10%), Exhaust (4%)

• 2012 turnover - $686mn, EBIDTA margin – 16.8%, Net Margin – 8%

• Tyres 42% of total sales, from 434 stores. Has done 24 acquisitions in 11 years to build the tyre vertical. Aiming for 1300 tire stores

• Market cap: $1.38bn.

• Valuation (www.finance.yahoo.com)

– EV/EBITDA: 14x

– Price/Sales: 1.8

– P/E: 32 (trailing)

– P/E (FY15): 20x

($mn) FY11 FY12 FY13

Revenues 637 687 732

Growth (%) 12.8 7.8 6.6

EBITDA 101 116 101

Margin (%) 15.9 16.9 13.8

Net Income 46 55 43

The Pep Boys (listed)


• Started in 1921

• Has 750+ stores in 35 states of US, and 19,000 employees

• 12.8 million sft of retail space, 7300 service bays

• Apart from tires, provides a variety of automotive repair services including: Scheduled maintenance services, oil changes and tune-ups, brake repair and replacement, air conditioning, financial services

• Tires are 19% of revenue, other parts and accessories are 60%, and service is 21%

• Market cap: $639mn.


– EV/EBITDA: 7.8x

– Price/Sales: 1.15x

– P/E: n.a

– P/E (FY15): 18x

($mn) FY11 FY12 FY13

Revenues 1989 2063 2091

Growth (%) 3.7 1.4

EBITDA 83 66 12

Margin (%) 4.2 3.2 0.6

Net Income 36 29 13

TCi Tire Centers (unlisted)


• A wholly owned subsidiary of Michelin North America Inc.

• 58 retail locations

• 77 wholesale distribution centers

• 10 retreading plants

• Has two divisions: distribution and commercial.

– The distribution division serves passenger and light truck tire retailers across the country.

– TCi supports its truck and earthmover customers from its 68 commercial centers located throughout the United States.

S&S Tire


• Started in 1974

• Current size:– 8 Retail Tire Stores

– 18 Commercial Truck Tire Centers,

– 3 Tire Retreading Plants,

– 10 Wholesale Tire Distribution Centers

– Over 1 million square feet of inventory space

• Does business in 15 states.

Tire Distribution Systems (TDS)


• 44 locations in 8 states

• Formed in 1996, when Bandag, world’s largest supplier of retreading materials, acquired 100 percent interests in five Bandag dealerships through a newly formed subsidiary, Tire Distribution Systems, Inc.

• In 1996, these dealerships had aggregate pre-tax earnings of $16 million, net sales of approximately $366 million

• Aggregate cash purchase price of the transactions was approximately $158.5 million

• In 2006, Bandag itself got acquired by Bridgestone Americas Holding, Inc., the U.S. subsidiary of Japan’s Bridgestone Corporation

Europe


Euromaster

• Fully owned subsidiary of Michelin

• Started in the 1967 in UK, known as ATS then.

• In 1991, the brand Euromaster is created, ATS network became ATS Euromaster.

• In 1992, the first center branded Euromaster is opened in France

• Network now present in 17 countries, and over 2200 outlets

• Key countries: – UK: 476

– France: 408

– Germany: 352

– Spain: 350

– Italy: 105

– Netherlands: 101

– Sweden: 76

• In 2011, Euromaster reported turnover of €1,872m, and had 11,500 employees

• Sells over 9 million car tyres per year, of all brands (not just Michelin)


Kwik Fit

• Started in 1971

• 1,218 directly-managed tyre fitting centres in the UK, France and Holland.

• Market leader in UK and Holland

• In 1995 Kwik Fit Insurance Services was launched to offer Kwik Fit branded motor insurance on behalf of a panel of leading insurance companies.

• The Group’s turnover in 2010 was £875 million, of which the Group’s major business, Kwik-Fit UK, with 673 centres, represented £561 million

Ownership changes at Kwik Fit

• 1999: Acquired by The Ford Motor Company for more than $1billion

• 2002: Ford divests to CVC Capital Partners

• 2005: Acquired by PAI Partners, which sold sold its German subsidiary Pit-Stop and also sold Kwik Fit Financial Services to Fortis UK.

• 2011: Acquired by Itochu Corp


Vianor Tyres

• Owned by Nokian Tyres, a leading Nordic tyre manufacturer

• Vianor is the biggest tyre chain, in terms of size and reach, in the Nordic countries, Russia and the CIS countries.

• In year-end 2012, the chain comprised 1,037 sales outlets in 26 different countries in Nokian Tyres’ core market regions.

• The Nokian Tyres Group owns 182 Vianor outlets, while the rest operate on a franchising/partnership principle.

• In 2012, the chain grew with 127 new outlets.

• Net sales in 2012 was Euro 315 mn

• Apart from tyres and related accessories (like rims), its outlets sell other car parts like: car batteries, shock absorbers, exhaust pipes, oils and other car parts.

• Its service selection includes tyre storage, oil change, air conditioner service, brake adjustment and adjustment of steering angles.


RoW


Canadian Tire Corp (listed)

• Started in 1922

• 490 tire outlets, all in Canada

• Has moved much beyond tire retail, into areas like gasoline retail, home products, garments

• Does not disclose tire revenue separately. Total retail revenue wasC$10.4bn in 2012.

• Market Cap: $7.5bn


– EV/EBITDA: 12x

– Price/Sales: 0.68

– EV/Sales: 0.88

– P/E: 15 (trailing)


(C$mn) 2011 2012

Revenues 10,387 11,427

Growth (%) 10.0

EBITDA 762 803

Margin (%) 7.3 7.0

Net Income 467 499

Beaurepaire (unlisted)

• Started in 1922

• Australia's leading tyre retailer, with approximately 300 stores nationwide.

• Merged with Dunlop Group in 1980


Bob Jane T Mart (unlisted)

• Started in 1965

• Has 156 outlets currently through Australia

• Apart from tyres, sells car batteries as well


Transactions


Japanese conglomerates entering US, Europe


TBC Corp – Sumitomo Corporation • In 2005, TBC Corporation was purchased by Sumitomo Corporation of America (SCOA) in

$1.1bn transaction

• Was listed on Nasdaq prior to this

Kwik Fit – many —Itochu Corp• Sold in 1999 by the promoter to the Fort Motor Company for US $1.6b.

• Ford sold in 2002 to CVC Capital Partners

• In 2005, Kwik Fit was sold for £800m to PAI Partners, a leading French-based private equity firm.

• The Kwik Fit Financial Services arm of the business was sold by PAI to Fortis Insurance UK, now Ageas (UK) Limited, for a figure of £215m in 2010, while the tyre retailing and service centre business was sold to ITOCHU Corporation for $1bn

Acquisitions by Tyre Cos


Pirelli’s several acquisitions• Däckia Holding AB, Sweden, 2011: Acquired Sweden’s multi-brand tyre distribution

from the private equity group Procuritas Capital and minority shareholders for 625 million kronor, or approximately 70 million euro.

• Campneus, Brazil, 2012: Acquired 60%, 54 outlets

• Abouchar, Brazil, 2013: Abouchar had 29 outlet

Michelin - TCi

• Michelin acquired USA’s largest commercial tyre retailer and retreader TCi in 1999

• At that time, TCi had revenues of around $500mn, from 163 locations

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