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Genuine Parts' S.P. Richards Unit to Tie Up With Essendant

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Per a Reuters news, Genuine Parts Company (GPC - Free Report) announced to spin off its wholesale distribution business, S.P. Richards. Thereafter, the S.P. Richards business and the Essendant will be combined to create a new entity named Essendant, which will be headed by Essendant’s chief executive officer (CEO) Ric Phillips. CEO of S.P. Richards, Rick Toppin will be the chief operating officer of the new entity. The combination of Essendant and S.P. Richards will result in a more competitive business products distributor with higher scale and service capabilities along with greater ability to support customers.

The deal, combining Essendant and S.P. Richards, is structured as a Reverse Morris Trust. The transaction implies a valuation of S.P. Richards of approximately $680 million. Atlanta, GA-based Genuine Parts will receive $347 million in cash while the shareholders of the company will own around 51% of the combined company, post closing. The deal is slated to close before the end of 2018. However, it is subject to regulatory and shareholder approvals, and satisfaction of certain other customary closing conditions.

Notably, Essendant is a wholesale distributor of workplace items whereas S.P. Richards distributes a range of products, including office furniture, computer supplies and school supplies, to resellers in the United States and Canada.

In the past six months, Genuine Parts has underperformed the industry it belongs to. Its shares have declined 6.2% compared with the industry’s fall of 1.5%.

Genuine Parts carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the auto space are Allison Transmission Holdings, Inc. (ALSN - Free Report) , Honda Motor Co., Ltd. (HMC - Free Report) and Renault SA (RNLSY - Free Report) . While Allison Transmission Holdings sports a Zacks Rank #1, both Honda and Renault carry a Zacks Rank #2 (Buy).

Allison Transmission has expected long-term growth rate of 10%. In the past year, shares of the company have returned 16.2%.

Honda has expected long-term growth rate of 5.2%. In the past year, shares of the company have returned 22.8%.

Renault has expected long-term growth rate of 3.5%. The shares of the company have advanced 40.5% in the past year.

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