Carlyle Group Inc. has made a significant move in the industrial sector by acquiring Advance Auto Parts Inc.’s Worldpac unit for $1.5 billion. This marks Carlyle’s first major industrial investment in over two years, signaling their confidence in the automotive aftermarket industry.
Worldpac, a wholesale distributor of original equipment replacement parts, has been a strong performer, generating approximately $2.1 billion in revenue for the 12 months ending June 30. The decision to sell the Worldpac unit was driven by pressure from shareholder activists, who believed that divesting this segment would allow Advance Auto Parts to better compete with industry giants like AutoZone Inc. and O’Reilly Automotive Inc.
Following the announcement of the acquisition, shares of Advance Auto Parts took a hit, dropping as much as 14% in premarket trading. The company also revised its net sales forecast for the year, expecting comparable store sales to be flat to down 1%. Despite these challenges, Advance Auto Parts remains committed to improving its sales trajectory and asset productivity to deliver stronger returns for shareholders.
For Worldpac, the acquisition by Carlyle presents new opportunities as the automotive industry continues to evolve. With cars becoming more complex and older vehicles requiring maintenance, Worldpac is well-positioned to capitalize on this trend. Carlyle’s head of global industrial & transportation, Martin Sumner, highlighted the resilience of the aftermarket industry, noting that it is not tied to new car production but rather to the growing number of aging vehicles on the road.
Carlyle’s investment in Worldpac adds to its impressive portfolio of industrial carve-outs, which includes companies like Nouryon, Axalta, Atotech, Signode, and Allison Transmission. The firm’s track record in the sector, combined with its recent acquisitions like Duravant and Baxter International Inc.’s kidney care business, demonstrates its commitment to driving growth and value creation in the industrial space.
Centerview Partners is advising Advance Auto Parts on the Worldpac deal, while Bank of America Corp. and BMO Capital Markets are working with Carlyle to facilitate the acquisition. This strategic partnership between Carlyle and Worldpac is poised to create synergies and drive innovation in the automotive aftermarket industry, setting the stage for future growth and success.
In conclusion, Carlyle’s acquisition of Worldpac represents a significant milestone in the industrial sector and underscores the firm’s confidence in the aftermarket industry’s potential for growth. With a focus on operational excellence and strategic investments, Carlyle is well-positioned to drive value creation and deliver strong returns for its shareholders in the years to come.