Tuesday, 31 July 2007 17:00

Keystone Automotive to merge with LKQ Corporation

Keystone Automotive Industries, Inc. (Nasdaq:KEYS) has signed a definitive merger agreement with LKQ Corporation (Nasdaq:LKQX) in which LKQ will acquire Keystone for $48 per share in cash, representing an aggregate purchase price of approximately $811 million on a fully diluted basis. The merger is expected to close early in the fourth quarter of calendar 2007, subject to the approval of Keystone’s shareholders, regulatory approvals and other customary conditions. The merger agreement does not contain a financing contingency.

Keystone’s board of directors has unanimously approved the terms of the merger agreement and has resolved to recommend that the Keystone shareholders approve the transaction.

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“In addition to providing tremendous value to our shareholders,” said Rick Keister, Keystone’s president and chief executive officer, “this transaction delivers a true combination of complementary strengths. Keystone’s aftermarket product offerings are a perfect fit with LKQ’s leading presence in the recycled parts business. We envision an outstanding combined distribution network, greatly enhanced by Keystone’s exceptionally strong organization -- one that has grown dramatically over the last decade.

“Today, Keystone is the leading distributor of aftermarket collision replacement parts – comprised of a highly respected team dedicated to quality, superior customer service and growth. The Keystone-LKQ merger presents unique opportunities to provide a comprehensive program of aftermarket, remanufactured and recycled parts to our customers, and we look forward to realizing these opportunities,”

Goals of transaction

According to LKQ, the transaction would:

        •Create a more comprehensive vehicle alternative replacement parts business with combined revenue of approximately $1.5 billion

        •Enhance customer service through an expanded national network of over 260 distribution branches

        •Generate operating synergies that will result in EPS accretion in 2008 with longer term upside

“We have consistently executed strategies to grow LKQ and create stockholder value,” said Joe Holsten, president and CEO of LKQ. “LKQ and Keystone are a great strategic fit and this acquisition is a natural progression of our strategy to expand our presence in the distribution of automotive replacement parts, an industry that we estimate to be over $188 billion in size.”

To complement its recycled OEM parts business, LKQ acquired Global Trade Alliance, an aftermarket parts distributor, in 2004. Since that time, LKQ has successfully integrated a number of smaller aftermarket and refurbished parts distributors to better serve its direct repair shop customers, insurance carriers and extended warranty providers.

Holsten noted, “LKQ’s combination with Keystone accelerates the execution of our strategy to achieve balance between the highly complementary recycled and aftermarket parts businesses.”

He added: “This transaction should have significant benefits for our customers as it immediately gives us an expanded national footprint of more than 260 distribution centers and expands our ability to provide customers with a broadened offering of readily available, high quality recycled, refurbished and aftermarket collision repair parts along with our well known customer service. We believe the merger will allow for better availability and higher utilization of alternative parts in the repair process, which will benefit our insurance company customers and grow our business.”

“Keystone has a strong distribution network and customer base with substantial brand equity,” Holsten added. “They have achieved substantial and profitable growth as an independent company. This transaction affords LKQ and Keystone the opportunity to create an even stronger organization, deliver compelling value to our customers and provide for enhanced career opportunities for LKQ and Keystone employees. Keystone’s aftermarket product line is a perfect complement to LKQ’s leading presence in the recycled parts marketplace. We look forward to joining forces with Keystone to offer our customers a comprehensive national alternative parts inventory and improved fulfillment levels through our expanded network.”


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