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Last Updated: Tuesday, 20 September 2005, 07:45 GMT 08:45 UK
Sumitomo gets grip on tyre firm
US car
The market for replacement tyres in the US is growing
Sumitomo Corporation, the Japanese conglomerate, is to buy US tyre retailer TBC Corporation for $1.1bn (120bn yen, 609m).

The purchase - Sumitomo's largest US deal - marks a major expansion into the US replacement tyre market in which it has operated for several years.

TBC is the largest independent tyre retailer in the US, with more than a 1,000 stores and sales of about $2bn.

Sumitomo said the deal would significantly boost its profitability.

Largest market

The US replacement tyre market is the largest in the world. About 240 million spare tyres - worth $25bn - are sold every year.

Sumitomo has been operating in the wholesale tyre market through its Tradeways subsidiary.

This investment complements our portfolio of operating companies
Susumu Kato, Sumitomo Corporation of America

The TBC deal - which must be approved by TBC shareholders and US regulators - will give Sumitomo an enhanced retail presence.

TBC, which has been trading for nearly fifty years, operates 1,175 directly managed and franchised outlets in the US.

It sells about 23 million replacement tyres annually, accounting for about 10% of the US market.

Longevity

Sumitomo said the increased lifespan and mileage of vehicles in the US had resulted in a growing market for replacement tyres.

"This is the single largest investment that Sumitomo Corporation of America has made and complements our portfolio of operating companies," said Susumu Kato, the company's chief executive in the US.

TBC said that the deal was a good one for the company's investors.

"As our Board considered all the strategic and financial alternatives, it became clear that this transaction was in the best interest of all TBC stakeholders," said its chief executive Larry Day.

Sumitomo said it expected to grow its US business through acquisitions, since most independent US retailers were small family-owned concerns.




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