GotZoom

Found this on another message board I am on:

Tire Rack goes on block
by Soma Biswas Posted 02:18 EST, 12, Apr 2005


Tire Rack, a successful online retailer of automobile tires, is up for sale, according to sources.

Rothschilds is investment banker to the South Bend, Ind.-based company, the sources said.

While buying tires on the Internet and over the telephone might sound like a non-starter as a business proposition, the family-owned company manages to pull in $50 million in annual Ebitda, they said.

Tire Rack has achieved wide brand recognition among car enthusiasts by advertising in such magazines as Car and Driver and Road & Track.

Private equity firms such as Bain Capital LLC, as well as some tire retailers such as privately-held Discount Tire Co., may be interested in acquiring Tire Rack, said industry experts and investment bankers.

Tire Rack's Web site allows customers to match up their cars with a wide array of tires, sometimes offering cheaper alternatives than customers may find on their own at bricks-and-mortar tire dealers. And most traditional tire retailers can't match Tire Rack's variety, industry experts said.

The Web site also allows potential customers to match images of wheels with their particular models of car, a popular vanity feature for some auto buffs, said one investment banker familiar with tire retailers.

A 2003 article in USA Today quoted the company as saying it was selling more than 2 million tires a year.

Founder Peter Veldman opened a standard tire dealership in 1979. In 1996, he launched an online site.

Veldman and Rothschilds officials did not return calls for this article.

The company is known for providing independent advice to consumers, who can order tires online or over the phone.

"Tire Rack has really appealed to the car enthusiast market," said Jeff Zupancic, director of auto research at J.D. Power and Associates.

But, he added, "The market is not so big for people who are that involved with their tires."

Some bankers and analysts say Tire Rack has great potential among a broader retail customer base. They said its tires are often cheaper than those of traditional dealers because Tire Rack doesn't have to maintain hundreds of stores.

Tire Rack works with a network of preferred retailers that install, balance and align car tires ordered through the company in return for a cut of the sale price.

"Tire Rack's price points are often lower. Because of the efficiency of the model, they can price their tires cheaper," one banker said.

The company ships tires from a warehouse in South Bend to tire shops closest to a customer. Customers pay a shipping charge, but often don't pay taxes.

Tire Rack's biggest draw, however, is its wide offering of tires.

dmp

/me starts checking pockets...

I can contribute about $30....

GotZoom

Cool...so that is $31.00 from you and I..........

zoom44

ive got 25k in my retirement fund so now we are up to $25,031.00

Genesis

Praise the minority...and may we love our micro silica tread compounds! :D

nsxpowered

Better yet, anyone want to start a pool and guess how much it's going to sell for? The person with the closest price (down to the cent, wins).

OBryanRX8

???????

Aseras

well there goes the good deals...

KYRX8

so are they really selling the company? My boss would love to see this, hte tire rack is our biggest competitor

brillo

this doesn't necessarily mean something bad. Private companies sell all the time, I'm in banking, and we have many clients in this revenue size that are family owned, and for estate, liquidity or other reasons decide they have a good thing and want to cash out.

nsxpowered

Maybe it's because they foresee a bumpy future or a better business opportunity, the falling US dollar, maybe losing the market shares, lawsuits?. Lets just say 2 million tires a year and they make $3.00 profit per tire after all of the cost of employees, logistics, rent, marketing, utilities, communications, insurance, bills, blah blah blah, that would net $6,000,000 a year plus on top of the addition stuff likek springs, brakes, and accessories. Lets say $10 million from my horrible and really inaccurate calculations which is not to be relied on.

Now having that said... the Jaguars in Vegas with no warehouse, marketing, phone calls, employees. Even better the girl pay you to dance at your club and they pay off the bouncer, manager, bartender. blah blah blah.. I wonder.. going to work and looking at naked girls for $25+ million a year. Yeah I would say it's time to change jobs.

GotBass

Well everyhting good is bound to get messed up. Watch the new owners cut the selection or raise proces of hard to find performance tires. I Wonder if they keep the weekend autocross events in the parking lot.

KYRX8

is there any links to where this info can be found? Something proof positive they are for sale? The company i work for is one of the largest tire distributors in the country and we sell more aftermarket parts than the tire rack. We are a bigger company than the tire rack and my boss wants to know if it is truly for sale. I dont know why, i dont know if hes thinking of possibly purchasing it or if he's just excited because this could open up the market to us a little bit more.
If you know of any links, please let me know.

Thanks, Justin

nsxpowered

KYRX8 the easiest way is to call HQ, takes only a minute. If it sold business will not change because they have locked in exclusive channels and it comes with the selling price. If your boss decides to purchase Tire Rack, make sure he gives you a head position at Tire Rack.

PaulyG CT

Could this be American Tire Distributors? Looked at that junk bond deal recently....

I am sure if Tire Rack is for sale that Investcorp (ATD's owner) has been approached. If you use ATD's purchase valuation, then Tire Rack will go for about 10x EBITDA (earnings before interest, taxes, depreciation and amortization) or $500 million.

nsxpowered

So PualyG says 500 million.. and I say about 60 million, if I had 500 million I could easily create the buying power and marketing channels that TR already have and likely surpass it. I could do it for 75 million.

PaulyG CT

$50MM of EBITDA is nothing to sneeze at. Personally, I would not pay much more than 6X-7X EBITDA but I am old school in the LBO game.

If you can replicate TR for $75MM, go for it, but if you sell 2 million tires per year, you are going to need $35MM to $40MM just in inventory to get started, plus advertising ain't cheap either. TR has proven cash flow and a brand name, that is why it will sell for a big number.

PaulyG CT

Search for Tire Rack on www.thedeal.com The web version of the daily rag for the investment banking M&A crowd.

KYRX8

Thanks for the info. My boss had always said if it went for sale he'd buy it and he has the money/credit to do it. His company did just over 600million in business last year.
I let him know all this and sent him the link and im gonna let him worry about it. IF it is though, and he did buy it, how sweet would that be, i know id finally get moved to a better job.........oh to dream

KYRX8

update, i just go confirmation that it is indeed for sale, 35 million takes it

Cattywampus

Good maybe then they can actually make whitewater pearl a color so I can finally see what the he!! my rims will look like besides on every other color I don't want.

Aseras

so when do you start?

TeamRX8

iTrader: (25)

typical internet story, take a small fact and stretch it out as wide as you can :

http://forum.e46fanatics.com/showpos...66&postcount=2

KYRX8

very interesting. that was not the response my boss got when he talked with them. However, 35 mil sound more appropriate for a portion of the business rather than the whole thing.
Nice find