(Bloomberg) — Carlyle Group Inc. is acquiring Advance Auto Parts Inc.’s Worldpac division for $1.5 billion, the company’s first major industrial investment in more than two years.
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Worldpac, a wholesale distributor of genuine replacement parts, generated about $2.1 billion in revenue for the 12 months ended June 30, according to a statement Thursday that confirmed an earlier report from Bloomberg News.
Advance Auto Parts is under pressure from shareholder activists to spin off its Worldpac unit to improve compensation and better compete with AutoZone Inc. and O’Reilly Automotive Inc. In November, Advance Auto Parts said it was initiating a sale process for Worldpac and its Canadian operations under the Carquest banner.
Shares of Raleigh, North Carolina-based Advance Auto Parts fell as much as 14% in premarket trading Thursday after the company said it was cutting its net sales forecast for the year. The company now said it expects comparable store sales to decline flat to 1%, instead of rising flat to 1%. The stock has fallen 8% in the past year through Wednesday and is worth about a quarter of its peak in 2021.
“The next chapter of our strategic and operational review will now focus on the remaining Advance businesses, with the goal of improving our sales pipeline and the productivity of all of our assets to deliver stronger returns for our shareholders,” said Shane O’Kelly, president and CEO of Advance Auto Parts, in a statement accompanying the group’s second-quarter results.
Worldpac benefits from the fact that cars and their maintenance are becoming increasingly complex and older vehicles are reaching higher mileage.
“This industry is particularly resilient because it’s not tied to new car production,” said Martin Sumner, head of Carlyle’s Global Industrial & Transportation. “It’s tied to the car fleet, which is huge and getting older.”
Carlyle has invested about $13 billion in industrial carve-outs over the past two decades, including in companies such as Nouryon, Axalta, Atotech, Signode and Allison Transmission, the statement said. One of Carlyle’s most recent transactions in the sector was its 2022 investment in food processing and packaging equipment maker Duravant, the website said.
In a spin-off transaction announced last week, Carlyle agreed to acquire the renal care division of Baxter International Inc. for $3.8 billion.
Centerview Partners is serving as financial advisor to Advance Auto Parts on the Worldpac deal. Bank of America Corp. and BMO Capital Markets are working with Carlyle.
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