Snap-on Inc.(SNA - Analyst Report) recently announced that it has acquired Challenger Lifts, Inc. in an all-cash transaction for about $38 million. The acquisition was a strategic move by Snap-On to expand its existing undercar equipment line of products.
Based in Louisville, Ky., Challenger Lifts primarily designs, manufactures, and distributes a comprehensive line of superior car lifts, jacks and auto lift accessories primarily targeting customers in the automotive repair sector. The product line of Challenger Lifts perfectly complements the existing business of Snap-on’s Repair Systems & Information segment. In 2012, Challenger generated revenues of $45 million.
The acquisition of Challenger Lifts is in tandem with Snap-on’s long-term objectives of expanding its product range with new products and services and increasing penetration in geographic markets, including the emerging markets. In the last reported quarter, Snap-on had opened a new facility at the Kunshan Complex in China primarily for the undercar equipment. In addition, the company also launched lifts, both mid-tier scissors models that serve the Original Equipment Manufacturer (OEM) and higher-end shops across Asian markets, and lower cost two-post products that are important in the emerging markets for the developing independent repair shop segment.
Therefore, Snap-on believes that this acquisition will boost its strategic and expanding relationship with repair shop owners and managers. Further, given the technological expertise of Challenger and its rapid growth in the automotive industry, it is a part of service repair programs of almost every leading automotive manufacturer.
Challenger will be a part of Snap-on’s Repair Systems & Information segment. This division generated the highest revenue among the company’s four segments. Revenues for the segment grew 8.8% to $246.1 million in last reported quarter (1Q13), attributable to higher sales to OEM dealerships and gains in sales of diagnostics and repair information products to repair shop owners and managers.
Snap-on currently has a Zacks Rank #3 (Hold). However, some other companies operating in the same industry and worth considering at the moment are CNH Global NV , Alamo Group Inc. (ALG - Snapshot Report) and Crane Co. (CR - Snapshot Report), all having a Zacks Rank #2 (Buy).