Advance Auto Parts to Acquire Discount Auto Parts
Advance Auto Parts to Acquire Discount Auto Parts
ROANOKE, Va. and LAKELAND, Fla., Aug. 7 Advance Auto Parts
and Discount Auto Parts, Inc. announced today that they have
signed a definitive agreement for Advance to acquire Discount in a merger
transaction. As a result of the merger, Discount shareholders will own
approximately 13% (approximately 4.3 million shares) of the total shares
outstanding of the combined company. Discount shareholders will receive $7.50
in cash plus 0.2577 shares of common stock of the combined company for each
Discount share. Advance Holding Corporation will file a registration
statement with the SEC covering the shares to be issued in the transaction and
will become a public company and renamed Advance Auto Parts, Inc. Larry
Castellani will remain as Chief Executive Officer of Advance. Peter Fontaine,
Chairman and Chief Executive Officer of Discount, will become a member of the
Board of Directors of Advance.
Advance and Discount combined today operate 2,420 stores in 38 states. On
a pro forma trailing twelve month basis, the combined companies generated over
$3.0 billion in revenues and approximately $243 million in EBITDA. Management
believes that significant benefits will be obtained through purchasing and
distribution efficiencies and other expense savings. Such efficiencies could
total $30 million on an annual basis. At closing, total debt (net of cash) is
estimated to be approximately $950 million and total diluted Advance shares
outstanding will be 33.8 million.
"Discount Auto Parts provides Advance with a solid position in the
Southeast, a leading presence in the important state of Florida, and an
emerging, sound commercial delivery operation," said Larry Castellani, CEO of
Advance. "With Discount's strong team and a customer service orientation
similar to our own, we believe the combined company will be an even stronger
competitor in our industry."
"We liked the fit with Advance from the start," said Peter Fontaine,
Discount Auto Parts Chairman. "Advance offered us an opportunity to merge
with a company that was very similar to ours, from its roots in family
ownership and its culture, to its store format and customer demographic. We
believe the merger is a great fit and a solid win for us all: our
shareholders, our team and our customers."
Based on the above referenced pro forma financial information including
expected efficiencies, the stock component of the transaction will have an
implied value of $7.50 - $9.50 per existing Discount share when applying a
latest twelve months EBITDA multiple of 7x-8x. This multiple range is at the
low end of the current multiple range for comparable auto parts retailers,
including AutoZone, Genuine Parts, O'Reilly Automotive and Pep Boys. When the
$7.50 per share cash component is included, the total implied value of the
transaction will be an estimated range of $15.00 - $17.00 per existing
Discount share. No assurances can be given regarding the price of Advance's
stock following the close of the transaction.
As part of the transaction, holders of outstanding options to purchase
common stock of Discount will receive, in exchange for their Discount options,
either cash payments (for those options with an exercise price under $15.00
per share) or options to purchase the common stock of Advance Auto Parts, Inc.
(for those options with an exercise price at $15.00 or more).
Fontaine Industries Limited Partnership, a partnership controlled by Peter
Fontaine, is Discount's largest shareholder and has entered into a voting
agreement requiring Fontaine Industries to vote its shares in favor of the
transaction and has granted an irrevocable proxy to Advance Stores Company to
vote such shares. In addition, Fontaine Industries has entered into a stock
option agreement granting an option to Advance Stores Company to purchase the
shares held by Fontaine Industries under certain circumstances. Fontaine
Industries owns approximately 25% of the outstanding common stock of Discount.
In connection with the merger agreement, Discount's Board of Directors
approved an amendment to its Stockholder Rights Agreement to make the
provisions of the Stockholder Rights Agreement inapplicable to the
transactions contemplated by the merger agreement.
The transaction is subject to approval by the shareholders of Discount,
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
other customary closing conditions, and is expected to close in the fourth
calendar quarter of 2001.
Advance and Discount will hold a conference call on August 8, 2001 at
9:00 am EDT to discuss this transaction. For access to the conference call,
please dial 800-374-1487 for domestic listeners or 706-679-3987 for
international listeners by 8:55 am EDT on the date of the call, and ask for
reference number 1552692. If you are unable to participate on the conference
call, a replay of the conference call will be available from August 8, 2001 to
August 15, 2001. To access the recorded conference call, interested parties
should call 800-642-1687 for domestic listeners or 706-645-9291 for
international listeners and reference reservation number 1552691.
The conference call and related presentation will also be webcast over the
Internet at http://www.discountautoparts.net or http://www.streetevents.com.
The presentation will also be available at http://www.advanceautoparts.com
JPMorgan acted as the sole financial advisor on the transaction to Advance
and will lead the financing along with Credit Suisse First Boston and Lehman
Brothers Inc. Salomon Smith Barney Inc. acted as exclusive advisor to
Discount.
Advance Auto Parts is the primary trade name for Advance Stores Company,
Incorporated, a wholly owned subsidiary of Advance Holding Corporation.
Advance ended the second quarter of 2001 with 1,765 stores in 38 states,
primarily located in the eastern and mid-western regions of the United States
and in Puerto Rico and the Virgin Islands. The company is based in Roanoke,
Va., and is the second largest auto parts chain in the nation. Additional
information about the company, employment opportunities, services, as well as
on-line purchase of parts and accessories can be found on the company web site
at http://www.advanceautoparts.com.
Discount Auto Parts, Inc. is one of the Southeast's leading specialty
retailers and suppliers of automotive replacement parts, maintenance items and
accessories to both DIY consumers and professional mechanics and service
technicians. The Company currently operates stores located throughout Florida,
Georgia, Mississippi, Alabama, Louisiana and South Carolina.
Forward-Looking Information
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The forward-looking
statements include, but are not limited to: (1) statements about the benefits
of the merger between Advance and Discount Auto Parts, including future
financial and operating results, purchasing efficiencies, distribution
efficiencies and other cost savings; (2) statements with respect to Advance's
and Discount's plans, objectives, expectations and intentions and other
statements that are not historical facts; and (3) other statements identified
by words such as "believes," "expects," "anticipates," "estimates," "intends,"
"plans," "targets," "projects" and similar expressions. As used herein,
Advance shall be deemed to mean Advance Holding Corporation and its
wholly-owned subsidiaries Advance Auto Parts, Inc. and Advance Stores Company,
Incorporated. These statements are based upon current beliefs and
expectations of the managements of Advance and Discount Auto Parts, and are
subject to significant risks and uncertainties. Actual results may differ
materially from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: (1) the
risk that the businesses of Advance and Discount Auto Parts will not be
integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected efficiencies and cost
savings from the merger may not be fully realized or realized within the
expected time frame; (3) revenues following the merger may be lower than
expected; (4) operating costs, customer loss and business disruption following
the merger, including, without limitation, difficulties in maintaining
relationships with suppliers and employees, may be greater than expected; (5)
inability to obtain or meet conditions imposed for governmental approval for
the merger or merger schedule; (6) the failure of Discount Auto Parts'
shareholders to approve the merger; (7) recessionary trends in general or in
specific areas where Advance and Discount Auto Parts operate; (8) competitive
pricing and other competitive pressures; and (9) other economic, business,
competitive and/or regulatory factors affecting Advance's and Discount Auto
Parts' businesses generally.
More detailed information about some of these factors is set forth in
Advance's and Discount Auto Parts' filings with the SEC, including Advance's
annual report on Form 10-K for the fiscal year ended December 30, 2000 and
Discount Auto Parts' annual report on Form 10-K for the fiscal year ended
May 30, 2000, including Discount Auto Parts' 2000 annual report to
shareholders attached thereto. Advance and Discount Auto Parts are under no
obligation to (and expressly disclaim any such obligation to) update or alter
their forward-looking statements whether as a result of new information,
further events or otherwise.
Investors and security holders are advised to read the proxy
statement/prospectus regarding the business combination transaction referenced
in the foregoing information, when it becomes available, and any other
relevant documents filed with the SEC by Advance and Discount Auto Parts
because the documents will contain important information. The proxy
statement/prospectus will be filed with the SEC by Advance and Discount Auto
Parts. Investors and security holders may obtain a free copy of the proxy
statement/prospectus (when available) and any other document filed with the
SEC by Advance or Discount Auto Parts at the SEC's web site at
http://www.sec.gov. The proxy statement/prospectus and such other documents
may also be obtained from Advance and Discount Auto Parts by making a request
to Advance Holding Corporation, 5673 Airport Road, Roanoke, Virginia 24012,
Attention: Corporate Secretary, Telephone: 540-362-4911; or Discount Auto
Parts, Inc., 4900 Frontage Road South, Lakeland, Florida 33815, Attention:
Corporate Secretary, Telephone: 863-687-9226.
Discount Auto Parts, Advance and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies of
Discount Auto Parts' shareholders to approve the business combination
transaction and adopt the agreement providing for the merger. The directors
and executive officers of Discount Auto Parts also may have an interest in the
transaction, including as a result of holding stock or options of Discount
Auto Parts. A detailed list of the names of Advance's directors and executive
officers is contained in Advance's annual report on Form 10-K, filed on March
30, 2001, and a detailed list of the names of Discount Auto Parts' directors
and executive officers and their ownership of stock and options of Discount
Auto Parts is contained in Discount Auto Parts' proxy statement, filed on
August 31, 2000, for its 2000 annual meeting of shareholders, as updated by
beneficial ownership reports filed subsequent to such annual meeting. Such
documents, and the proxy statement/prospectus disclosing interests of the
directors and executive officers of Discount Auto Parts, when filed, may be
obtained without charge at the SEC's web site at http://www.sec.gov.
