Sumitomo Acquire TBC Corporation

Sumitomo Corporation and its wholly-owned subsidiary Sumitomo Corporation of America have entered into an agreement to acquire TBC Corporation, one of the leading marketers of automotive replacement tires in the U.S.

The acquisition agreement is made and entered into as of September 18, 2005, for a total purchase price of approximately Yen120 billion ($1.1 billion).

TBC Corporation is the biggest tire wholesaler and retailer founded in 1956, and its shares are listed on the NASDAQ Stock Exchange. The company has annual sales of approximately US$2 billion and engages in the retail chain business with 1,175 direct management and franchise outlets throughout the U.S. as well as the wholesale business with warehousing facilities in 40 places within the U.S.

Sumitomo Corporation has been engaged in the tire wholesale business through Sumitomo Corporation of America and its controlled company Treadways Corporation under the Sumitomo brand and each private brand with an annual turnover of approximately \40 billion over the past 35 years. This acquisition aims to expand the tire business value chain into the retail field to make a drastic enhancement of sales and business bases and achieve an extensive improvement of profitability.

The U.S. auto market is the world's largest market, and every Japanese automaker places high importance on the U.S. auto market. The number of registered cars and light trucks in the U.S. amounts to 225 million, 3.2 times as large as in Japan. In addition, the U.S. replacement tire market is also a giant market with an annual sales volume of 240 million tires and annual sales value of US$25 billion, which represent approximately 3.7 times as much as in the Japanese market. The number of registered cars in the U.S. has been growing at an annual average of 2.2%, reflecting an increase in the population and an increase in the length of the average vehicle age (from 8.5 years in 1995 to 9.8 years in 2004). Furthermore, the annual distance traveled per vehicle has increased from 17,100 km in 1994 to 19,200 km in 2003, and replacement tire demand has been growing at 2–3% per year. In these business environments, TBC Corporation has an annual sales volume of 23 million tires and a market share of 10% and is the biggest firm among independent tire sellers.

Most of independent tire specialty retail store in the U.S. remain small chain stores under family operations. Under such circumstances, industry-wide restructuring and consolidation is expected to accelerate in the near future.

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