RICHMOND, Va. – Advance Auto Parts Inc. said Wednesday it is buying General Parts International Inc. for $2.04 billion in cash, which the companies say will create the biggest automotive replacement parts provider in North America.
As part of the transaction targeted to close by late 2013 or early 2014, Advance Auto will get 1,246 company operated stores and 1,418 independently owned Carquest locations. Its shares soared in premarket trading.
The Roanoke, Va., seller of auto parts and batteries currently operates more than 4,015 stores in the U.S., Puerto Rico and the Virgin Islands. General Parts is a privately held distributor and supplier of original equipment and aftermarket replacement products for commercial markets operating under the Carquest and Worldpac brands. The combined company will be based in Roanoke, Va., and continue to have a presence in Raleigh, N.C.
Advance Auto CEO Darren Jackson said the transaction provides a “compelling strategic opportunity” to expand the company’s geographic presence. In January, the company acquired privately held Northeast car parts supplier B.W.P. Distributors Inc., accelerating its growth in the Northeast.
Advance Auto also said Wednesday it expects third-quarter earnings of $1.42 per share on revenue of $1.52 billion, compared with year-ago earnings of $1.21 per share on revenue of $1.46 billion. Revenue at stores open at least a year is expected to decrease 2 per cent. That’s an important measure for retailers because it excludes results from newly opened or closed stores.
Analysts polled by FactSet predict earnings of $1.31 per share on revenue of $1.55 billion.
The company on Wednesday also reaffirmed its full-year adjusted earnings forecast of between $5.30 and $5.45. Analysts expect $5.55 per share.
When vehicle sales tumbled a few years ago, auto parts retailers such as Advance Auto Parts got a sales boost, as more Americans kept their vehicles longer and invested more in keeping them running.
But Americans have been buying new cars and trucks at a healthy pace in recent months, fueled by low interest rates, better credit availability and aging cars that need replacement.
Advance Auto Parts has been focused on streamlining and simplifying its organization to reduce costs and minimize the impact to sales and service levels. Its shares climbed $10.01, or 12.7 per cent, to $93 in premarket trading.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.