By Lisa Kerner
Charlotte, N.C., April 1 - O'Reilly Automotive, Inc. agreed to acquire CSK Auto Corp. in an exchange offer valued at $1.0 billion, including approximately $500 million of debt, it was announced on Tuesday.
Both companies' boards of directors have approved the deal, which gives CSK shareholders $11.00 of O'Reilly common stock, subject to a collar, plus $1.00 in cash for each share of CSK common stock.
The exchange ratio will be based on the average trading price of O'Reilly common stock for a specified time period, according to a joint statement from the automotive specialty retailers.
If the average trading price of O'Reilly stock is greater than $29.95, then the exchange ratio will equal 0.3673, and if the average trading price is less than $25.67, the exchange ratio will equal 0.4285, the release said.
To fund the acquisition and to refinance debt, O'Reilly entered into a commitment for a $1.2 billion asset-based revolving credit facility with Bank of America and Lehman Brothers Inc.
The transaction's close is conditioned on the successful conclusion of the exchange offer and other customary conditions.
O'Reilly said that once the transaction is complete, it will be the third-largest national auto parts retailer with about 3,200 stores located across the United States.
O'Reilly expects the transaction to be modestly accretive to its earnings per share in fiscal year 2009. Anticipated cost savings of about $100 million annually are expected beginning in fiscal year 2010.
Based on the closing stock prices on March 31, O'Reilly said it expects to issue approximately 16 million shares of O'Reilly common stock to CSK shareholders.
CSK president and chief executive officer Larry Mondry called O'Reilly's offer compelling.
"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," Mondry said in the release.
In February, CSK entered into a standstill agreement with O'Reilly, including O'Reilly in its review of strategic alternatives.
It was previously reported that CSK adopted a shareholder rights plan following O'Reilly's unsolicited $8-per-share bid for the company on Feb. 1.
O'Reilly was advised by Lehman Brothers, and CSK was advised by J.P. Morgan Securities Inc.
CSK is based in Phoenix, and O'Reilly is based in Springfield, Mo.
| Acquirer: | O'Reilly Automotive, Inc.
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| Target: | CSK Auto Corp.
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| Announcement date: | April 1
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| Transaction total: | $1.0 billion
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| Price per share: | $11.00 of O'Reilly common stock, plus $1.00 in cash
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| Expected closing: | Upon approvals
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| Stock price of acquirer: | Nasdaq: ORLY: $28.52 on March 31
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| Stock price of target: | NYSE: CAO: $9.31 on March 31
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