Genuine Parts Company ( GPC Quick Quote GPC - Free Report) is set to acquire Kaman Distribution Group (“KDG”) in a $1.3-billion, all-cash deal. Based in Bloomfield, KDG is a power transmission, automation, and fluid power industrial distributor and solutions provider. With a headcount of around 17,000, the company operates across the United States and serves more than 5,000 customers. Subject to satisfactory closing conditions, the deal is set for closure in first-quarter 2022.
The buyout is expected to bolster Genuine Parts’ scale and market position, while creating fresh opportunities for long-term growth, profits, and cash flow. It should be noted that KDG is expected to generate sales of $1.1 billion next year. Genuine Parts anticipates the buyout to be accretive to earnings in the first year after closing of the transaction and achieve $50-million annual run-rate synergies over three years. The expected leverage at the completion of the transaction is ~2x. The deal will be financed at closing via an existing revolver and accounts receivable sales agreement. GPC is expected to maintain liquidity of more than $2 billion.
Genuine Parts frequently undertakes strategic acquisitions to improve product offerings and expand its geographical footprint. The acquisitions of PartsPoint and Alliance Automotive Group have bolstered the company’s growth. The buyouts of Axis New England and Axis New York are also fueling Genuine Parts’ Industrial Parts Group. The acquisition of Inneco has expanded the industrial footprint of Genuine Parts to Australasia. Other strategic bolt-on acquisitions including Winparts, Rare Spares, and PARts DB have enhanced Genuine Parts' growth and capabilities.
In the last reported quarter, GPC not just delivered a comprehensive beat but also recorded higher year-over-year revenues and earnings. Encouraged by solid results, the company raised its full-year 2021 guidance. It currently projects revenues from automotive and industrial sales to witness a year-over-year uptick of 14-15% and 10-11% versus the prior guided range of 11-13% and 6-8%, respectively. Full-year adjusted earnings per share are envisioned in the band of $6.60-$6.65, higher than the prior forecast of $6.20-$6.35. Free cash flow is now projected in the band of $950 million to $1.15 billion, up from the previous forecast of $900 million to $1.1 billion.
Shares of GPC have risen 35.4% on a year-to-date basis. The company currently carries a Zacks Rank #2 (Buy). You can see
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