In Addition to O'Reilly (ORLY), Icahn Enterprises (IEP) Could Be Interested in Bidding for Advance Auto Parts (AAP) - Sterne Agee CRT
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Sterne Agee CRT analyst Ali Faghri weighed in on reports from StreetInsider Tuesday that Advance Auto Parts (NYSE: AAP) is exploring a potential sale.
Faghri sees O'Reilly Automotive (NASDAQ: ORLY) as the most likely acquirer among the larger players due to a favorable geographic concentration, successful track record with large-scale integration, participation in the PBY bidding, and an under-levered balance sheet.
In addition, the analyst sees Icahn Enterprises (NYSE: IEP) (owner of Uni-Select US / Auto Plus) as a potential buyer, although they assign a lower probability than ORLY given fewer strategic synergies.
The firm believe an ORLY-AAP combination could be ~20% accretive, using conservative assumptions. The firm's assumptions assumes: ORLY pays a 40% premium to AAP's current stock price, or ~12.5x EBITA; Synergies equal 5% of AAP; AAP would divest 10% of stores at a 15% contribution margin; ORLY funds the acquisition using 50% stock and 50% debt.
The firm maintained a Neutral rating on Advance Auto Parts.
For an analyst ratings summary and ratings history on Advance Auto Parts click here. For more ratings news on Advance Auto Parts click here.
Shares of Advance Auto Parts closed at $156.17 yesterday.
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