O'Reilly Automotive Proposes to Acquire CSK Auto for $8.00 Per Share in Cash
February 01 2008 - 8:30AM
Business Wire
O�Reilly Automotive, Inc. (NASDAQ:ORLY) announced today that it is
proposing to acquire all of the outstanding shares of CSK Auto
Corporation (NYSE:CAO) common stock for $8.00 per share in cash.
This proposal represents a 34% premium over CSK�s closing stock
price on Thursday, January 31, 2008. The proposal also represents a
63% premium over the average trading stock price for CSK over the
last thirty days. The total transaction is valued at approximately
$845 million, including the assumption of approximately $490
million of CSK debt. The acquisition is expected to be accretive to
O�Reilly�s earnings in the first full year after completion of the
acquisition excluding one time transaction costs. O�Reilly
Automotive Chief Executive Officer Greg Henslee stated, �While we
still prefer to work together with CSK and its board of directors
to negotiate a mutually beneficial agreement for our respective
stakeholders, we feel we have been forced to take our proposal
directly to CSK�s shareholders. We believe that it is critical to
give the CSK shareholders a chance to decide for themselves and
that they will find O�Reilly Automotive�s proposed acquisition of
CSK is extremely compelling and will create significant value for
each of our stakeholders. The combined company will be a more
effective and profitable competitor with the ability to better meet
the continuing evolution of the industry.� In light of the
compelling reasons for a combination of O�Reilly and CSK, and the
importance of allowing the companies� respective shareholders to
capitalize on the benefits of the proposed transaction sooner
rather than later, O�Reilly is releasing the following letter to
CSK publicly so that both companies� stakeholders will have the
opportunity to fully assess this unique proposal: � � � February 1,
2008 � Mr. Lawrence Mondry President and Chief Executive Officer
The Board of Directors CSK Auto Corporation 645 East Missouri
Avenue, Suite 400 Phoenix, AZ 85012 � Dear Larry: � As you know we
are very interested in pursuing opportunities for our two companies
and regret that our prior conversations have not been more
fruitful. Having not been able to move forward privately, we
believe the opportunities for our respective companies and their
employees, customers and shareholders are so compelling that it is
important to make our proposal public. � O'Reilly Automotive, Inc.
is proposing to acquire all of the outstanding shares of CSK's
common stock for $8.00 per share in cash. Our proposal represents a
34% premium, based on CSK's closing stock price on Thursday,
January 31, 2008. The proposal also represents a 63% premium over
the average trading stock price for CSK over the last thirty days.
� Our board of directors unanimously supports a combination with
CSK. We have been working extensively with our financing sources,
Lehman Brothers and Bank of America, and our proposal will not be
subject to a financing condition. In addition, we have worked with
antitrust counsel to analyze this transaction and believe that
there are no regulatory hurdles. Our proposal is conditioned on
satisfactory completion of a due diligence investigation, which we
believe can be completed expeditiously. � As you know, since March
2007, we have indicated to CSK on a number of occasions that we are
interested in acquiring CSK and have made proposals to acquire CSK
at a substantial premium to market. During this time we have
watched the stock plummet from $16.98 on March 9, 2007 to a low of
$3.96 on January 18, 2008. We have attempted to be flexible and
have indicated our willingness to pursue a transaction using cash
or O'Reilly stock. Based on our commitment to pursue a transaction
and in reliance on your public filings, we completed open market
purchases of approximately 2 million shares or 4.9% of CSK common
stock. � The benefits of our proposed transaction are very
compelling and offer significantly more security to CSK
stockholders, creditors, suppliers and partners than CSK on a
standalone basis. Equally important, this transaction provides
growth and advancement opportunities for employees. The combined
company would be the third largest auto parts retailer in the
country. Building upon the foundation of CSK's Western presence and
O'Reilly's Midwestern and Southeastern presence, the combined
company would be positioned to further leverage O'Reilly's very
effective dual-market strategy. � At your request on October 18,
2007, we signed a confidentiality agreement in anticipation of
access to information. We received no information. On November 14,
2007, you requested that we sign a standstill agreement. We are
uncomfortable entering into a long agreement that would prohibit us
from making an offer directly to CSK stockholders in the event
CSK's board determines not to pursue a change of control
transaction. We believe our existing confidentiality agreement
should be sufficient in order to permit access to CSK's due
diligence materials and to be allowed to participate in CSK's
process. � We would unquestionably prefer to work cooperatively
with you to complete a negotiated transaction that would produce
substantial benefits for our respective stockholders. We and our
advisors, Lehman Brothers and Skadden, Arps, are ready to commence
due diligence and to negotiate definitive documentation
immediately, and request that you agree to work with us. We are
prepared to meet with you or CSK's Board to achieve this outcome. I
believe we owe it to our respective stakeholders to pursue this
opportunity vigorously. � I look forward to hearing from you soon.
� Respectfully, � /s/ Greg Henslee � Greg Henslee Chief Executive
Officer O'Reilly Automotive, Inc. The O�Reilly proposal is subject
to satisfactory completion of due diligence, approval by O�Reilly
and CSK�s respective Boards of Directors, approval by CSK
shareholders and the receipt of customary regulatory approvals.
Lehman Brothers Inc. is acting as exclusive financial advisor to
O�Reilly, and Skadden, Arps, Slate, Meagher & Flom LLP is
acting as legal counsel. About O'Reilly Automotive, Inc O'Reilly
Automotive, Inc. is one of the largest specialty retailers of
automotive aftermarket parts, tools, supplies, equipment and
accessories in the United States, serving both the do-it-yourself
and professional installer markets. Founded in 1957 by the O'Reilly
family, the Company operated 1,830 stores in the states of Alabama,
Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana,
Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South
Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and
Wyoming as of December 31, 2007. Forward-Looking Information
O�Reilly Automotive, Inc. claims the protection of the safe-harbor
for forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements can be
identified by forward-looking words such as �expect,� �believe,�
�anticipate,� �should,� �plan,� �intend,� �estimate,� �project,�
�will� or similar words. In addition, statements contained within
this press release that are not historical facts are
forward-looking statements, such as statements discussing among
other things, expected growth, store development and expansion
strategy, business strategies, future revenues and future
performance. These forward-looking statements are based on
estimates, projections, beliefs and assumptions and are not
guarantees of future events and results. Such statements are
subject to risks, uncertainties and assumptions, including, but not
limited to, competition, product demand, the market for auto parts,
the economy in general, inflation, consumer debt levels,
governmental approvals, our ability to hire and retain qualified
employees, risks associated with the integration of acquired
businesses, weather, terrorist activities, war and the threat of
war. Actual results may materially differ from anticipated results
described or implied in these forward-looking statements. Please
refer to the Risk Factors sections of O�Reilly Automotive, Inc.�s
Form 10-K for the year ended December 31, 2006, for more details.
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