U.S. auto equipment supplier LKQ Corp. LKQ-Q said it would buy Quebec’s Uni-Select Inc. UNS-T for about $2.6-billion in a bid to bolster its aftermarket car parts business in North America as demand grows for vehicle repairs and services.
Chicago-based LKQ is offering $48 a share in cash for Boucherville, Que.-based Uni-Select, the two companies said in a joint statement Monday. That’s a 20.7-per-cent premium to Uni-Select’s average share price over the past 20 trading days.
The deal has an equity value of about $2.6-billion on the basis of a fully diluted share count that assumes conversion of debentures and management equity, a Uni-Select spokesman said. Including debt assumed by LKQ, it’s a $2.8-billion transaction.
The takeover highlights the changing dynamics in the auto industry as rising interest rates spur drivers to keep their vehicles longer. That in turn has fuelled demand for repairs and services. Cars are also lasting longer as their quality has improved, which is also driving demand for parts – everything from brake rotors to air filters.
The deal is another win for Uni-Select chief executive officer Brian McManus, who has tripled the value of the company in just 20 months as CEO by pulling it, as he puts it, back to the basics. “Not swinging for the fences, not looking for the home runs. Really just doing 100 things 5 per cent better,” he said in an interview Monday.
Before that, Mr. McManus built Stella Jones, a producer of industry pressure-treated wood products such as railway ties and utility poles, into a multibillion-dollar stalwart on the Toronto Stock Exchange. Now led by CEO Éric Vachon, the company has a market capitalization of $2.8-billion.
Uni-Select wasn’t looking to be bought. It was looking for acquisition opportunities of its own, Mr. McManus said.
“The table got turned on us so to speak,” Mr. McManus said of the takeover. “It’s very complimentary, presents a great opportunity for our employees. It frankly puts us in probably a stronger competitive position against the people that are out there. ... Taken as a whole, you look at all this and you say, ‘You know what? This makes a lot of sense.’”
Uni-Select said it will sell its GSF Car Parts business in Britain as part of the deal as it seeks to sidestep concerns from antitrust regulators there. In Canada, LKQ is not a major player, which means there are no obvious hurdles clearing Investment Canada and Competition Act requirements.
Directors for Uni-Select unanimously approved the takeover after obtaining opinions from outside financial and legal advisers and are recommending shareholders vote for it. Investors holding about 20 per cent of the company’s shares, including Birch Hill Equity Partners and EdgePoint Investment Group, back the deal and have signed support agreements to see it through, Uni-Select said.
“Our preliminary discussions with shareholders were broadly positive, so we do not expect the vote will face significant opposition,” National Bank analyst Zachary Evershed said in a research note. “The primary pushback seemed to focus on whether the sale was coming too early, cutting short the benefits of operational improvements under the new management team.”
Uni-Select distributes automotive refinish and industrial coatings in North America and is also among the biggest companies in automotive aftermarket parts. In Canada, the company supports more than 16,000 vehicle repair and collision shops and another 4,000 shops through its repair-installer and auto refinishing banners.
Uni-Select operates about 95 of its own stores under banners such as Bumper to Bumper, Auto Parts Plus and Finishmaster. It employs 5,200 people.
Nicolas Van Praet