Advance Auto Parts Gets An Extra Part In $2 Billion Transaction
By Sam Lewis
Nation’s second largest auto parts retailer acquires General Parts International in cash deal
The boards of directors for both Advance Auto Parts and General Parts International have approved an all-cash transaction valued at $2.04 billion. The Oct 16 transaction allows Advance Auto Parts to acquire General Parts International — a privately held supplier and distributor of automotive equipment and parts operating under Carquest and Worldpac brands —and its employees.
The completion of the transaction will create the largest automotive aftermarket parts retailer in North America. Combined, the companies have more than 70,000 employees and generate more than $9 billion in annual sales. The transaction also helps Advance Auto Parts’ growth strategy and will boost shareholder value.
The newly combined company will make its headquarters in Advance Auto Parts’ home city of Roanoke, VA while continuing to maintain a presence in General Parts International’s home city of Raleigh, NC. Nothing will change in the upper management of both companies. O. Temple Sloan III will remain Genera Parts International’s president. He will report directly to Darren Jackson, Advance Auto Parts’ CEO, and Sloan is expected to join the company’s board of directors. “This transformational transaction provides a compelling strategic opportunity for Advance to expand our geographic presence and commercial capabilities to better serve customers,” says Jackson.
For Advance Auto Parts, the deal brings more than 1,200 stores operated by General Parts International, along with approximately 1,400 independently owned Carquest locations to its 3,800 existing locations. “The addition provides us with an immediate platform and scale across North America, full market coverage and the opportunity to position ourselves as the market leader in the commercial business,” says Jackson of Advance Auto Parts. General Parts International’s Sloan adds, “We are excited to bring together two highly complementary automotive aftermarket companies. The combination with Advance Auto Parts is the next logical step in our company’s evolution.” Sloan continues, “Advance’s retail presence, strong capability infrastructure and acquisition integration experience combined with GPII’s leadership in the commercial, independent and import segments creates a powerful platform to drive profitable growth.”
Advance Auto Parts expects the deal to bring nearly $160 million in synergies, which will be fully realized over the next few years. The deal is expected to close late this year, or early 2014. “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,” says Advance Auto Parts’ CFO Mike Norona.
Earlier this year, Advance Auto Parts acquired privately owned B.W.P. Distributors, a privately owned car parts supplier. This move boosted growth for Advance Auto Parts in the Northeast U.S. Vehicle sales tumbled a few years ago, and the auto parts industry benefitted from this. In recent months, the roles have reversed, having the automotive industry improving through lower interest rates, more and better available credit, and the need to replace aging cars. It will be interesting to see just how much Advance Auto Parts benefits from the acquistion of General Parts International in the resurging market of new car buying.