O'Reilly Automotive, Inc.'s purchase of CSK Auto Corporation continues the automotive aftermarket industry's trend of consolidation and makes the combined company the third largest national auto parts retailer in the country. The two companies have signed a definitive merger agreement under which 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. "Today is an exciting day for both O'Reilly and CSK shareholders," says Greg Henslee, O'Reilly's automotive chief executive officer. "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." Under the terms of the agreement, 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 '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. "The benefits of this transaction are very compelling," adds 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 nationwide leader in the automotive aftermarket industry. Equally important, this transaction provides growth and advancement opportunities for CSK's team members." The transaction will create a combined entity that expects to realize several significant strategic benefits, including: - Becoming a leading auto-parts retailer. Following the close of the transaction, 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. - Creating a strengthened and diversified position, as well as a national platform. 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 well 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. - The opportunity to enhance existing CSK operations. 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. The implementation of O'Reilly's industry-leading distribution and inventory management systems will further improve the combined company's competitiveness in CSK's markets. 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. 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. For more information about O'Reilly's, vist the company's Web site. |
