by Amy Antenora
On Tuesday it was announced that O’Reilly Automotive signed a definitive merger agreement with CSK Auto Corp., to acquire the company for approximately $1 billion. Shortly following the announcement, O’Reilly CEO Greg Henslee shared with aftermarketNews some preliminary details of this important acquisition.
What made CSK an appealing acquisition for O’Reilly? What do you feel are CSK’s biggest assets?
We have a history of successful acquisitions so we understand what type of company makes the best fit for O’Reilly and how to integrate its people and processes into our company to make it stronger. Building upon the foundation of CSK’s strong Western presence and O’Reilly’s Midwestern and Southeastern presence, we believe the combined company will be positioned to further leverage O’Reilly’s strong dual market strategy and CSK markets.
What broad-based services currently in place at CSK do you see as most valuable (e.g, real estate/store locations, customer service center/call center, distribution centers, merchandising strategies, wholesale business)?
O’Reilly and CSK maintain highly complementary business models in two distinctive regions of the country. Acquiring CSK will give O’Reilly a national platform and will allow further expansion into other geographical regions throughout the country.
CSK has a strong brand reputation, particularly on the West Coast. Would it be O’Reilly’s intention to re-brand these stores to O’Reilly (as was the case with Hi/LO and Discount Auto)?
We have always had a great amount of respect for CSK and the brands that they have established over the years. Consistent with our practices with previous acquisitions, ideally, we would plan to convert those brands to O’Reilly.
Part of our plan with CSK is to evaluate the effectiveness of their current brands and the markets in which they operate. We will then determine whether it makes sense to consolidate the CSK brands into O’Reilly. As has been our policy with past acquisitions, we plan to dual brand for some time and then transition the stores in phases to the O’Reilly brand.
Since the O’Reilly footprint doesn’t overlap very much with CSK, will we see any major distribution center closings or realignments? If so, where?
We are not ready to announce a final plan on what we will do to enhance the distribution network. There is still a detailed analysis that has to be done to make our final determination, but we’re relatively confident that the majority of the current CSK distribution centers are in locations that would be suitable to our business plan. Part of the successful execution of our dual-market strategy is having an intensive distribution network and access to parts that it takes to service the installer customers and the professional side of the business, so over time our plan would be that we would further enhance CSK’s distribution network in order to better serve the wholesale customers.
In the few months that O’Reilly has been working to acquire CSK Auto, what have you learned about the company’s culture, and how do you anticipate merging the CSK culture with O’Reilly’s culture, since both are so well-defined? What have you learned from similar previous acquisitions such as Hi/LO and Discount Auto?
We have great respect for CSK and its management team. As you may know, at O’Reilly, we have had a lot of success in implementing our dual-market strategy in our current stores. Our plan is to smoothly integrate the two companies and use the best of both O’Reilly and CSK to make a stronger combined company, which includes executing our dual-market strategy in the western half of the United States.
Outside of this acquisition are there additional plans to grow O’Reilly’s national footprint?
With consideration to the integration of the CSK stores to our model this year, we plan to reduce our new store openings in 2008 to somewhere in the range of 140 to 150 stores from 205, which is what we previously announced. Toward the end of the year, we will evaluate where we stand and make an announcement for 2009.
Can you tell us how management will be structured once the acquisition is complete — with respect to the leadership team currently in place at CSK?
We are still in the process of evaluating our integration plans for CSK. What I can tell you is that this transaction is about growth and improving our competitive position. There will always be places for good people in the combined company and we believe much of the value of this combination will come from improvements in our business, rather than cost-cutting.
Previous information suggested that your initial bid for CSK was somewhere in the $8 per share range. The official announcement today (April 1) regarding the pending acquisition places the purchase price in the range of $11 to $12 per share. Any comments with regard to the difference in price and the value this brings to the shareholders of both companies?
As you may know, prior to our entrance into our Standstill Agreement with CSK, we publicly expressed our strong desire to evaluate non-public information that would allow us to refine our preliminary offer price. After a thorough and extensive analysis, our board of directors concluded that this transaction will generate significant value for the combined companies’ stockholders, growth opportunities for team members and enhanced service to our customers.
