Advance Auto expands repair shop business with $2 billion buy

Wed Oct 16, 2013 4:12pm EDT
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By Sagarika Jaisinghani

(Reuters) - Advance Auto Parts Inc (AAP.N: Quote) will buy 1,418 outlets of the Carquest chain to boost its auto repair operations to complement its car parts business, sending its shares up as much as 20 percent to a record high.

Advance Auto, which sells products such as batteries, air fresheners and engine parts, said it would buy General Parts International Inc for just over $2 billion, creating the largest North American retailer of auto parts.

General Parts is the biggest operator of the Carquest chain, which runs auto repair shops and car parts stores. General Parts also owns Worldpac, the No.1 supplier of replacement parts for imported car and truck brands.

Carquest and Worldpac - two of the largest automotive retail parts suppliers in North America - had sales of $2.9 billion in the last 12 months.

"We view Advance Auto's decision as a smart strategic acquisition that vaults the company into a much stronger position in the faster growing and more attractive do-it-for-me segment and gives them a crown jewel in Worldpac," Credit Suisse analyst Simeon Gutman said in a client note.

Advance Auto said the General Parts purchase will hugely increase its customer reach from coast-to-coast in North America, where parts sales have slipped as more Americans buy new cars.

The company has been trying to improve its footprint in the commercial repair industry. It bought the second-largest operator of Carquest stores, BWP Distributors Inc, in December.

Commercial repair accounts for about 85 percent of Carquest's sales.   Continued...