SPRINGFIELD, Mo. & PHOENIX-- One of the largest specialty retailers
of automotive aftermarket parts, tools, supplies, equipment and
accessories in the United States, for both the do-it-yourself and
professional installer markets, O’Reilly Automotive and CSK Auto
Corporation, which operates the brand names Checker Auto Parts,
Schuck's Auto Supply, Kragen Auto Parts, and Murray's Discount Auto
Stores today announced that the two companies have signed a definitive
merger agreement.
Under the terms of this agreement, O’Reilly will acquire all of the
outstanding shares of CSK common stock pursuant to an exchange offer,
in a transaction valued at approximately $1.0 billion, including
approximately $500 million of debt. The boards of directors of both
companies have approved the transaction.
SPRINGFIELD, Mo. & PHOENIX-- One of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, for both the do-it-yourself and professional installer markets, O’Reilly Automotive and CSK Auto Corporation, which operates the brand names Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts, and Murray's Discount Auto Stores today announced that the two companies have signed a definitive merger agreement.
Under the terms of this agreement, O’Reilly will acquire all of the outstanding shares of CSK common stock pursuant to an exchange offer, in a transaction valued at approximately $1.0 billion, including approximately $500 million of debt. The boards of directors of both companies have approved the transaction.
Once the transaction closes, O’Reilly will be the third largest national auto parts retailer with approximately 3,200 stores located across the United States. The combined company had pro forma revenues of approximately $4.4 billion in 2007.
“Today is an exciting day for both O’Reilly and CSK shareholders,” stated O’Reilly Automotive Chief Executive Officer Greg Henslee. “As a combined company, we will be even stronger and more competitive, with the ability to better meet the continuing evolution of the automotive aftermarket industry. Additionally, we are creating a company that will generate significant value for the combined companies’ shareholders, growth opportunities for team members and enhanced service to our customers.”
"The benefits of this transaction are very compelling," said Larry Mondry, CSK Auto’s President and Chief Executive Officer. "After careful consideration of a number of viable alternatives, our Board has determined that partnering with O’Reilly is clearly the best course of action for our shareholders. As part of a stronger, more financially flexible company, shareholders, creditors and suppliers will have a meaningful opportunity to participate in the development of a company that will be well positioned to be a nation-wide leader in the automotive aftermarket industry.”
O’Reilly and CSK maintain highly complementary business models in two distinctive regions of the country. Building upon the foundation of CSK’s strong Western presence and O’Reilly’s Midwestern and Southeastern presence, the combined company will be positioned to further leverage O’Reilly’s very effective dual-market strategy. Additionally, acquiring CSK will give O’Reilly a national platform and will allow further expansion into other geographical regions throughout the country.
O’Reilly expects to strengthen CSK’s existing operations by executing its proven dual market strategy of providing exceptional service to both DIY customers and professional installers. It’s hoped the implementation of O’Reilly’s distribution and inventory management systems will further improve the combined company’s competitiveness in CSK’s markets.
CSK shareholders will receive $11.00 of O’Reilly common stock, subject to a collar, plus $1.00 in cash for each share of CSK common stock.
The amount of consideration to be received per share of CSK common stock will equal a number of shares of O'Reilly common stock based on an exchange ratio equal to $11.00 divided by the average trading price of O'Reilly common stock for the five trading days ending two trading days prior to the consummation of the exchange offer plus $1.00 in cash (subject to reduction); provided, however, that if the average trading price of O'Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if the average trading price is less than $25.67, then the exchange ratio shall equal 0.4285.
O’Reilly anticipates that the transaction will be modestly accretive to O’Reilly’s earnings per share in fiscal year 2009. Cost savings are expected to be approximately $100 million annually beginning in fiscal year 2010, resulting in more significant earnings per share accretion. O’Reilly expects synergies to come primarily from leveraging the combined company’s buying power to lower product acquisition cost and streamlining CSK’s SG&A expense structure by implementing O’Reilly’s dual market strategy.
The transaction is subject to the successful conclusion of the exchange offer as well as customary closing conditions and antitrust approvals, including expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Based on the closing stock prices on Monday, March 31, 2008, O’Reilly expects to issue approximately 16 million shares of O’Reilly common stock to be issued to CSK shareholders.
O’Reilly has entered into a commitment for a $1.2 billion asset based revolving credit facility with Bank of America and Lehman Brothers Inc. which will be used to refinance debt, fund the cash portion of the consideration and other transaction-related expenses and to provide ample liquidity for the combined company going forward.
Lehman Brothers Inc. is serving as exclusive financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal adviser to O’Reilly. JP Morgan Securities Inc. is acting as financial advisor and Gibson, Dunn & Crutcher LLP is acting as legal advisor to CSK.
Investors will be able to obtain free copies of the registration statement, Schedule TO, Schedule 14D-9 as well as other filings containing information about O'Reilly and CSK without charge, at the SEC’s website (http://www.sec.gov ) once such documents are filed with the SEC.
A free copy of the exchange offer materials, when they become available, may also be obtained from O'Reilly or CSK.
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