MERGER MARKET: Omni United Group seeks targets to grow distribution network in US – CEO

Omni United Group, a Singapore-based tire designer, producer and distributor, is seeking to acquire more tire distributors in the US to expand its distribution network, President and Chief Executive Gajendra Singh Sareen said.
It is looking at two or three targets in the US, including one that has about 10 distribution locations on the East Coast. The company is likely to close at least one deal this year, with the goal of growing the number of distribution locations from 29 to 70 by the end of 2018, the CEO said.
OMNI ventured into the distribution space in the US through two acquisitions in 2015 and 2016, respectively, with the vision of getting closer to the retail segment and gaining intelligence over the North American market, which accounts for more than half of its revenue, Sareen said.
The global tire market is worth USD 250bn in value terms, of which the US accounts for 50%. There are about 265m cars in the country, the CEO added.
Following its recent acquisitions, OMNI has 29 warehouses with a total capacity of close to 1m sq ft and a network of more than 10,000 dealers primarily in states on the West Coast including California, Arizona and Texas, according to a company press release in June 2016.
The company will focus on searching targets on the East Coast with its internal team, with a goal of covering close to 75% of the domestic US population on back of having 70 locations nationwide, Sareen added.
It worked with Akin Gump Strauss Hauer & Fled on the legal aspect of the previous transactions, he said.
Asked how large a war chest the company has for acquisitions, Sareen said the company does not have a fixed budget. He noted, however, that OMNI took a look at a tire retailer in the US with 800 retail locations two years ago, and the deal size was estimated to be near USD 450m. The deal fell through for undisclosed reasons, but the company could seek one of a comparable size, he noted.
Apart from the US, the company is also interested in acquisitions of tire distributors in Asia, such as Singapore, Malaysia, and Japan, and also Europe, although the priority is given to the US where it already has its distribution infrastructure in place, Sareen said. China and India, however, are off its radar due to the challenges of conducting business activities there despite the huge market sizes, he added.
With an acquisition in 2016, the group is expected to book revenue in excess of USD 400m in 2017, up from USD 250m-300m a year earlier, Sareen said.
Rebuffed takeover approaches
OMNI has received ongoing approaches by private equity investors for a stake sale and as an IPO candidate, and the company has also received backdoor listing proposals, Sareen said. However, the executive said the company has no need to tap private equity funds or the capital market to fund its expansion at this point. It is comfortable with debt financing amid a low interest rate environment, he noted.
In addition, the company has received approaches from strategics interested in buying out the company, but it prefers to be independent, Sareen said. As a sole owner of the company, he sees a lot of scope of growth.
Despite also being offered tire manufacturing targets in the region, OMNI has no intention of owning manufacturing assets, Sareen said. It currently manufactures its products in multiple markets including China, Indonesia and Thailand through contract manufacturing partnerships, he added.
While the manufacturing space has a set of dominant players in addition to an increasing number of smaller producers, there is no single global player dominating the distribution area, a segment that OMNI aspires to capture, Sareen said.
The group designs, manufactures and distributes tires for consumer, commercial and industrial uses. It offers tire products under the brand names of Radar, RoadLuc, Birla, Speedways, Patriot, and Timberland, which was launched in 2014 in partnership with outdoor footwear and lifestyle brand Timberland, as per its website. Beyond the US, the company also generates sales from the Middle East, Europe, Asia and Australia, Sareen said.
Sareen founded OMNI United in 2003, after an exit from Singapore-based Mindtrac.com, which is a B2B online market exchange for tire products, as per the company’s website.
The company has a total headcount 400 globally, the executive said.
by Lizzie Ko and Riddhima Saxena in Singapore