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Advance, General Parts set $2 billion merger deal

Oleg Prikhodko | E+ | Getty Images

Advance Auto Parts will buy General Parts International for just over $2 billion, creating the largest North American retailer of auto parts, as strong new car sales hit demand for repair and replacement.

Advance Auto shares rose 5.5 percent to $87.05 in trading before the bell on Wednesday.

The combination of Advance Auto Parts and General Parts would create a company with $9.2 billion in annual sales, just above those of the current biggest player, AutoZone Inc. AutoZone reported adjusted sales of about $9 billion for the year ended Aug. 31.

A strengthening U.S. economy in the first half of 2013 prompted more Americans to buy new cars, eating into the market for replacement parts, already sluggish due to a warmer-than-usual winter last year.

Advance Auto, which has relied on acquisitions to offset a fall in organic sales, said the General Parts purchase will give it coast-to-coast access in North America, hugely increasing its customer reach.

Advance Auto Chief Executive Darren Jackson said the addition of 1,418 Carquest locations would give the company scale across North America and the opportunity to position it as the leader in the commercial market.

Raleigh, North Carolina-based General Parts operates about 40 percent of Carquest's 3,400 stores across North America. Founded in 1961 by Temple Sloan Jr., General Parts also owns Worldpac, which supplies replacement parts for imported car and truck brands.

Sources told Reuters in July 2012 that General Parts was auctioning off its Carquest stores for about $2 billion.

Advance Auto also said on Wednesday that sales for the quarter ended Sept. 30 rose 4.3 percent due to its purchase of BWP Distributors Inc last year. Sales at stores open for at least a year fell 2 percent.

Advance Auto will have to pay a termination fee of $185 million, under certain circumstances, if the deal falls through.

--By Reuters