The acquisition of Keystone Automotive Industries Inc. by a Chicago rival last week is expected to form an emerging powerhouse in the automotive aftermarket parts industry.
LKQ Corp., which derives 80 percent of its revenues from selling rebuilt original auto parts, will nearly double in size with its $811 million acquisition of Keystone, a Pomona-based maker of newly manufactured aftermarket parts.
“When you put the two companies together it gives you a national footprint for the distribution of recycled and aftermarket vehicle repair parts,” said Gary Prestopino, an analyst with Barrington Research Associates Inc. who tracks both companies. “It should help to drive efficiencies in the distribution of parts nationwide.”
The $48-per-share acquisition of Keystone, which reported annual revenue of $713 million in 2006, amounted to a 10 percent premium over Keystone’s $43.61 share price the day prior to the deal’s announcement. LKQ received a $1.09 billion in secured financing from Deutsche Bank and Lehman Brothers Inc. to carry out the transaction.
LKQ Chief Executive Joe Holsten said the acquisition is a step toward achieving balance between the company’s recycled and aftermarket parts divisions as the company broadens its distribution network.
Currently, only about 20 percent of LKQ’s annual $832 million revenues comes from aftermarket parts. But the combined company is expected to command a 20 percent share of the entire $12 billion market for newly manufactured aftermarket parts, which is growing as more repair shops and insurance companies look to cut costs.
The deal also adds 137 distribution centers to LKQ’s existing network. “This transaction should have significant benefits for our customers as it immediately gives us an expanded national footprint of more than 260 distribution centers,” said Holsten, in a prepared statement.
Holsten later told analysts some of the warehouses may need to be closed if they are not geographically dispersed.
Shares of Keystone rose almost 8 percent to $47.03 in the two days after the deal was announced, while shares of LKQ jumped more than 12 percent to $28.59 over the same period.
