O'Reilly to Acquire CSK Auto for $1.0 Billion
April 01 2008 - 8:30AM
Business Wire
O�Reilly Automotive, Inc. (�O�Reilly�) (Nasdaq: ORLY) and CSK Auto
Corporation (NYSE:CAO) (�CSK�) today announced that 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. 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 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. �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. 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: 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.
Strengthened and diversified position, creating 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. 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. Financial Considerations 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. Timing, Approvals and Financing
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. Investor/Analyst Conference Call O�Reilly
will provide further details regarding this announcement on a
conference call with analysts and investors scheduled for Tuesday,
April 1 at 10:00 am Eastern time. Those who wish to participate
should call 1-800-865-4445 for domestic callers or 973-935-2840 for
international callers. When prompted, provide the passcode, which
is 41919438. The conference call will also be webcast on the
Investor Relations section of O�Reilly website at
www.oreillyauto.com. For interested individuals unable to join the
live call, a replay of the webcast will be available on O�Reilly�s
website. 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. About CSK Auto CSK Auto Corporation is the
parent company of CSK Auto, Inc., a specialty retailer in the
automotive aftermarket. As of January 6, 2008, the Company operated
1,349 stores in 22 states under the brand names Checker Auto Parts,
Schuck's Auto Supply, Kragen Auto Parts, and Murray's Discount Auto
Stores. Additional Information In connection with the exchange
offer, O'Reilly intends to file a registration statement on Form
S-4 and a Schedule TO with the Securities Exchange Commission
("SEC") and CSK intends to file a solicitation/recommendation
statement on Schedule 14D-9. Such documents, however, are not
currently available. These documents contain important information
about the transaction and should be read before any decision is
made with respect to the exchange offer. 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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