Advance Auto Parts (AAP) to Acquire General Parts in $2.04B Deal
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Financial Fact:
Income before provision for income taxes: 177.84M
Today's EPS Names:
BTTX, VAXX, ELYS, More
Financial Fact:
Income before provision for income taxes: 177.84M
Today's EPS Names:
BTTX, VAXX, ELYS, More
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Advance Auto Parts, Inc. (NYSE: AAP) has entered into a definitive agreement to acquire General Parts International, Inc. (GPII), a leading privately held distributor and supplier of original equipment and aftermarket replacement products for commercial markets operating under the CARQUEST and WORLDPAC brands, in an all-cash transaction with an enterprise value of $2.04 billion. The transaction has been approved by the boards of directors of both companies.
The transaction creates the largest automotive aftermarket parts provider in North America, with annual sales of over $9.2 billion and more than 70,000 Team Members. The strong combined financial profile allows for an all-cash transaction and supports Advance’s commitment to maintain its investment grade rating. The acquisition of GPII will accelerate Advance’s growth strategy and enhance shareholder value through the following strategic benefits:
* Creates Market Leader – (1) #1 automotive aftermarket parts provider in North America with a balanced platform for growth between Do-It-yourself (DIY) and Commercial, (2) #1 distributor of import automotive parts and (3) the largest automotive aftermarket business-to-business e-commerce platform in North America.
* Delivers Scale – Provides Advance with complete coast-to-coast coverage across North America, creating a company with scale, reach and expanded growth opportunities benefiting shareholders, customers and team members. This presence in new markets allows Advance the ability to expand its geographic footprint in an efficient manner.
* Accelerates Complementary Market Opportunities – Expands Advance’s product and category offerings in both core and new product lines (i.e. paint and heavy duty), creates new sales channel with independent customers and broadens ability to grow with attractive customer segments such as larger bay garages, import specialists, national accounts and fleet and government programs.
* Strengthens Leading Brands and Capabilities – Enhances Advance’s ability to serve customers through the transfer of CARQUEST’s commercial capabilities and Team Member parts knowledge into Advance stores while expanding DIY into select company operated CARQUEST stores. The combination expands key capabilities in customer service through enhanced daily replenishment and customer loyalty programs to a larger truck fleet and a significantly expanded commercial sales team.
Financial Benefits
Advance anticipates that the transaction will result in approximately $160 million of annual run-rate synergies to be fully realized within three years after closing. The transaction is also expected to generate considerable free cash flow and deliver significant estimated FY14 Cash EPS(1) accretion of more than 20% excluding one-time costs to achieve synergies and a percentage increase in the low teens including one-time costs to achieve synergies.
Advance Auto Parts intends to finance the acquisition through a combination of senior notes, bank debt and existing cash on hand. Following the transaction, Advance expects to continue to have a solid balance sheet supported by the strong cash flow of the combined business. In connection with the transaction, Advance has received a financing commitment from JPMorgan Chase Bank, N.A. with the senior notes offering and bank debt syndication expected to occur prior to closing.
Mike Norona, Chief Financial Officer of Advance Auto Parts said, “This strategic transaction presents an exciting opportunity for value creation and Advance is dedicated to delivering on the compelling financial potential this combination creates while remaining committed to maintaining our investment grade credit rating.”
The transaction is subject to regulatory approvals and customary closing conditions and is expected to close by late 2013 or early 2014.
Advisors
Financial advisors to Advance Auto Parts are Blackstone Advisory Partners L.P. and J.P. Morgan Securities LLC and legal advisor is Kirkland & Ellis LLP. Financial advisor to General Parts International Inc. are Wells Fargo Securities, LLC and The Orr Group, LLC and legal advisors are Manning Fulton & Skinner, P.A. and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
Preliminary Third Quarter Results
As previously announced, Advance will release its third quarter earnings on October 31, 2013, but in connection with the transaction announcement is releasing the following preliminary information which remains subject to change as the quarterly information is finalized.
Total sales for the third quarter increased 4.3% to $1.52 billion, as compared with total sales during the third quarter of fiscal 2012 of $1.46 billion. The sales increase was driven by the acquisition of B.W.P. Distributors, Inc. (BWP) and the net addition of 170 new stores over the past 12 months, partially offset by a comparable store sales decrease of 2.0% versus a comparable store sales decrease of 1.8% during the third quarter of fiscal 2012. Year-to-date, total sales increased 4.3% to $5.09 billion, compared with total sales of $4.88 billion over the same period last year.
The Company’s operating income during the third quarter is expected to be $170.7 million which was a 13.5% increase versus the third quarter last year. Third quarter earnings per diluted share (EPS) are expected to be $1.42 which was a 17.4% increase versus the third quarter last year. Included in our EPS results are $0.04 of transaction related expenses related to our pending acquisition of GPII and $0.02 of BWP integration expense. The Company also reaffirms its previously released earnings per share 2013 annual outlook of $5.30 - $5.45.
*** The Street sees Q3 EPS of $1.30 and sales of $1.55 billion.
The transaction creates the largest automotive aftermarket parts provider in North America, with annual sales of over $9.2 billion and more than 70,000 Team Members. The strong combined financial profile allows for an all-cash transaction and supports Advance’s commitment to maintain its investment grade rating. The acquisition of GPII will accelerate Advance’s growth strategy and enhance shareholder value through the following strategic benefits:
* Creates Market Leader – (1) #1 automotive aftermarket parts provider in North America with a balanced platform for growth between Do-It-yourself (DIY) and Commercial, (2) #1 distributor of import automotive parts and (3) the largest automotive aftermarket business-to-business e-commerce platform in North America.
* Delivers Scale – Provides Advance with complete coast-to-coast coverage across North America, creating a company with scale, reach and expanded growth opportunities benefiting shareholders, customers and team members. This presence in new markets allows Advance the ability to expand its geographic footprint in an efficient manner.
* Accelerates Complementary Market Opportunities – Expands Advance’s product and category offerings in both core and new product lines (i.e. paint and heavy duty), creates new sales channel with independent customers and broadens ability to grow with attractive customer segments such as larger bay garages, import specialists, national accounts and fleet and government programs.
* Strengthens Leading Brands and Capabilities – Enhances Advance’s ability to serve customers through the transfer of CARQUEST’s commercial capabilities and Team Member parts knowledge into Advance stores while expanding DIY into select company operated CARQUEST stores. The combination expands key capabilities in customer service through enhanced daily replenishment and customer loyalty programs to a larger truck fleet and a significantly expanded commercial sales team.
Financial Benefits
Advance anticipates that the transaction will result in approximately $160 million of annual run-rate synergies to be fully realized within three years after closing. The transaction is also expected to generate considerable free cash flow and deliver significant estimated FY14 Cash EPS(1) accretion of more than 20% excluding one-time costs to achieve synergies and a percentage increase in the low teens including one-time costs to achieve synergies.
Advance Auto Parts intends to finance the acquisition through a combination of senior notes, bank debt and existing cash on hand. Following the transaction, Advance expects to continue to have a solid balance sheet supported by the strong cash flow of the combined business. In connection with the transaction, Advance has received a financing commitment from JPMorgan Chase Bank, N.A. with the senior notes offering and bank debt syndication expected to occur prior to closing.
Mike Norona, Chief Financial Officer of Advance Auto Parts said, “This strategic transaction presents an exciting opportunity for value creation and Advance is dedicated to delivering on the compelling financial potential this combination creates while remaining committed to maintaining our investment grade credit rating.”
The transaction is subject to regulatory approvals and customary closing conditions and is expected to close by late 2013 or early 2014.
Advisors
Financial advisors to Advance Auto Parts are Blackstone Advisory Partners L.P. and J.P. Morgan Securities LLC and legal advisor is Kirkland & Ellis LLP. Financial advisor to General Parts International Inc. are Wells Fargo Securities, LLC and The Orr Group, LLC and legal advisors are Manning Fulton & Skinner, P.A. and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
Preliminary Third Quarter Results
As previously announced, Advance will release its third quarter earnings on October 31, 2013, but in connection with the transaction announcement is releasing the following preliminary information which remains subject to change as the quarterly information is finalized.
Total sales for the third quarter increased 4.3% to $1.52 billion, as compared with total sales during the third quarter of fiscal 2012 of $1.46 billion. The sales increase was driven by the acquisition of B.W.P. Distributors, Inc. (BWP) and the net addition of 170 new stores over the past 12 months, partially offset by a comparable store sales decrease of 2.0% versus a comparable store sales decrease of 1.8% during the third quarter of fiscal 2012. Year-to-date, total sales increased 4.3% to $5.09 billion, compared with total sales of $4.88 billion over the same period last year.
The Company’s operating income during the third quarter is expected to be $170.7 million which was a 13.5% increase versus the third quarter last year. Third quarter earnings per diluted share (EPS) are expected to be $1.42 which was a 17.4% increase versus the third quarter last year. Included in our EPS results are $0.04 of transaction related expenses related to our pending acquisition of GPII and $0.02 of BWP integration expense. The Company also reaffirms its previously released earnings per share 2013 annual outlook of $5.30 - $5.45.
*** The Street sees Q3 EPS of $1.30 and sales of $1.55 billion.
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