WHEN: TODAY, THURSDAY, NOVEMBER 1ST
WHERE: CNBC'S "STREET SIGNS"
Following is the unofficial transcript of breaking news from CNBC's David Faber. All references must be sourced to CNBC.
DAVID FABER: Wanted to give you some breaking news. Potential M&A transaction. Advanced auto parts, an aftermarket retailer of automotive parts with over 3700 stores and a $5.2 billion market value, has hired Blackstone to explore a sale of the company, according to people familiar with the situation. The process is in relatively early stages and is largely confined to private equity firms that have previous expertise in retail. Bankers tell me at least three of the larger private equity firms are engaged in the exploration of bids and have sounded out banks to see what type of leverage could be arranged to finance any deal.
Advanced Auto is currently levered at about 2.5 times its ebita and bankers tell me debt could be taken up to as much as 5.5 or even 6 times ebita Any deal would be expected to come in at a premium of course over the current stock price which you see is now up sharply. It would be one of the larger lbo's if in fact it were to be done at that premium perhaps being as much as or more than $6 billion, we haven't seen many of that type or that size at least since the financial crisis. Of course at that size the stock of the company or any buyer would also require at fairly large equity check perhaps as much as $1.3 billion which could require two private equity firms to join forces for a bid or force them to at least try to raise additional direct investment from their limited partners something we have seen PE Firms do. But given the size perhaps makes the difficulty at bit higher of any deal.
It is still early in the sale process and there is no guarantee the current process will result in any transaction. Advanced Auto reported disappointing earnings on October 22nd for its third quarter as comp store sales declined by 1.8%. Sources tell me the company initiated the exploration for a buyer after reporting that quarter. The company expects to earn between $5.05 and $5.15 a share for 2012. A company spokesperson has not returned calls at this point.
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