Speculation abounds as Carquest’s stores reportedly on the auction block

Jan. 1, 2020
Aftermarket insiders want additional details following a report that the Sloan family’s General Parts International, Inc. is “auctioning off” its 1,400 company-owned Carquest stores.
Their curiosity piqued, more than a few aftermarket insiders are on a quest for additional details following a dispatch from the Reuters wire service reporting that the Sloan family’s General Parts International, Inc. (GPI) is in the process of “auctioning off” its 1,400 company-owned Carquest stores, anticipating that the bidding could reach $2 billion.

The 2,000 independent Carquest outlets are not included in the proposed sale, according to Reuters, which cites three unnamed sources in describing the proposed transaction.

Numerous individuals and companies, including Carquest/GPI, either declined comment or had no response to interview requests.

However, a selection of aftermarket gurus with more than a century of industry expertise among them have formed a general consensus that a Carquest sale is likely to have little lasting impact – contingent, of course, on who does the buying. They spoke under conditions of anonymity.

“It shouldn’t surprise anyone that families are selling their businesses when they get to a certain size. Anytime you have a notable family like the Sloans selling their business, it creates a lot of interest, especially a company that’s the size of GPI. That’s a big footprint,” says one executive with a long history of analyzing industry mergers and acquisitions.

“For suppliers, probably nothing will change; Carquest will remain – it depends on who’s going to run it. If it’s an investment firm (rather than an existing aftermarket business), there will be less impact. You would not expect much to change externally. The face to the customer wouldn’t change at all. The Carquest brand has great cachet within the market, and I doubt if anyone would want to mess with that.”

“A lot of these guys have an unwritten code that they don’t want to muck things up in the industry,” says another source with vast experience in the mergers and acquisitions arena. “A lot of these things settle themselves. When it’s all said and done, you’ll have the same amount of stores, so it really doesn’t affect the aftermarket per se because people still have to buy parts for their cars.”

Yet another well-placed industry source, who has closely followed the Sloan family’s business activities for years, remains confident that any impending deal with the Carquest company-owned stores will come with a proviso that keeps the Carquest program group relatively intact.

“There’s a ton of stuff that makes up these relationships,” he says. “They have an obligation to the Carquest members that they recruited; they can’t leave them high and dry – they can’t cut these guys loose without a ship.”

He goes on to observe that “it’s a pretty complicated road map” when a transaction of this scope is in play. “It’s a major upheaval in the marketplace because of its size – what happens with the Sloan businesses impacts them all. When you get as big as these guys, it’s not so easy to leave town. There are a lot of friendships involved.”

“AWDA respects Carquest’s right to privacy,” says Bill Maggs, chairman of the board of governors at the Automotive Warehouse Distributors Association. “Carquest is a member of AWDA, and if they have a new owner we hope that they would see the value of the organization and remain in the organization.”

Reuters reports only that the company-owned stores are for sale. The use of “blind sourcing” (not naming the people interviewed for a story) has a number of aftermarket executives looking askance at the validity of the account, although in journalistic circles the international wire service has a high reputation for accuracy.

Known for its close-to-the-vest approach regarding business matters, the almost-legendary reticence of the Sloan family appears to have heightened the level of industry interest while generating a widespread reluctance to publicly comment on the issue.

A well-placed industry source anticipates that a venture capital firm is most likely to prevail in the bidding, rather than an existing aftermarket entity, “because the business models are not easily matched up.”

Another source agrees, adding that the ultimate outcome hinges on the buyer’s management strategies. “It comes down to somebody who is committed to the industry – or they allow someone who is committed and knowledgeable to run it. If they do that, everything should be fine.”

The Reuters report identifies two venture capital investors that might be in the running: Leonard Green & Partners and KKR & Co.

“KKR does not comment on speculation or rumor,” says spokeswoman Kristi Huller. Green did not respond to an interview request.

Three sources tell Aftermarket Business World that they believe only three industry operations have the wherewithal to participate in the auction: O’Reilly Automotive, Inc.; Advance Auto Parts and AutoZone.

As noted in the Aftermarket Business World Top 40 Auto Chain Report, O’Reilly ranks No. 2 in the nation with a 41 percent commercial/59 percent retail merchandising ratio. No. 3 Advance posts a 37 percent commercial/63 percent retail ratio, while No. 4 Carquest comes in at 85 percent commercial/15 percent retail.

No. 1 AutoZone is just the opposite, according to a source, with an estimated ratio of 15 percent commercial/85 percent retail.

“AutoZone’s official response is that we don’t comment on speculation, rumor and innuendo,” says a senior company executive. “Unofficially, ‘where there’s smoke there’s fire,’” he adds, referring to the Reuters report’s three sources of information.

“I wouldn’t hold your breath” waiting for AutoZone to place a bid, the executive says. Calling it “too big of an acquisition,” he explains that “there’s a lot of overlap with those stores. It probably doesn’t make a good fit for us – it’s not the right type of company for AutoZone.”

The executive concludes by pointing out that while “we owe it to our shareholders” to at least take a look at the Carquest offering, “it’s been 14 to 15 years since we’ve done a major acquisition.”

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