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BREAKING: AAG ACQUIRED BY GENUINE PARTS COMPANY

BREAKING: AAG ACQUIRED BY GENUINE PARTS COMPANY

BREAKING:  The following statement has been released by Genuine Parts Company:

ATLANTA and LONDON, September 25, 2017 — Genuine Parts Company (NYSE: GPC) (“the Company”) and Alliance Automotive Group (“AAG”), a leading European distributor of vehicle parts, tools and workshop equipment, announced today that they have entered into a definitive agreement under which Genuine Parts Company will acquire Alliance Automotive Group from private equity funds managed by Blackstone and AAG’s co-founders.  The acquisition is valued at a total purchase price of approximately $2 billion, including the repayment of AAG’s outstanding debt upon closing. The transaction has been approved by the Board of Directors of GPC and is expected to close in the fourth quarter of 2017, subject to the satisfaction of customary closing conditions and applicable regulatory approvals.    

AAG is the second largest parts distribution platform in Europe, with a focus on light vehicle and commercial vehicle replacement parts.  Headquartered in London, AAG has 7,500 employees and over 1,800 company-owned stores and affiliated outlets across France, the U.K. and Germany. AAG has a consistent track record of organic revenue and earnings growth supported by strategic investments based on a proven M&A strategy to gain scale, efficiencies and geographic coverage. 

AAG is expected to generate gross annual billings of approximately $2.3 billion (US$) including supplier direct billings, or $1.7 billion of revenue on a U.S. GAAP basis in 2017.  Additionally, the Company expects the acquisition to be immediately accretive to earnings in the first year after closing.  For 2018, incremental diluted earnings per share is estimated at $0.45 to $0.50 and adjusted earnings per share is estimated at $0.65 to $0.70, which excludes the amortization of acquisition-related intangibles.  The Company expects to incur one-time transaction costs in the fourth quarter of 2017.  

Paul Donahue, Genuine Parts Company’s President and Chief Executive Officer, stated, “We are excited to combine with AAG and enter the European markets with critical scale and a leading market position in the automotive aftermarket.  AAG is poised to contribute significant sales growth and earnings accretion to Genuine Parts Company and also serves to enhance the GPC platform for long-term, sustainable expansion across the global automotive parts industry.  AAG has a strong management team and a deep bench of talent, and our similar cultures and histories make this acquisition an excellent strategic fit. We are confident this business investment will create significant value for our shareholders, and we welcome the AAG team to the Genuine Parts family.  We look forward to their future contributions to our ongoing success.”

Jean-Jacques Lafont, Chairman, Chief Executive Officer and co-founder of Alliance Automotive Group, said, “The AAG team has tremendous respect for Genuine Parts Company and its well-deserved reputation as a long-standing leader in the automotive parts industry.  We are very pleased to combine our two great businesses and leverage our collective resources and expertise to accelerate growth.  AAG’s success is a testament to the hard work and dedication of our wonderful employees, without whom this transaction would not be possible. I am confident that, together, we will achieve great things and continue to provide the highest quality parts and service to our combined customers across the globe.” 

Lionel Assant, Head of European Private Equity at Blackstone, said, “Over the past three years, AAG has experienced tremendous growth and transformed into one of Europe’s leading automotive parts distributors.  We would like to thank AAG’s management team led by Jean-Jacques Lafont and Alistair Brown for their vision and leadership as well as all its staff for their exceptional efforts.  We have no doubt that the business will go on to further growth under Genuine Parts Company, which is the right partner to support AAG’s continued success.” 

The Company intends to finance the transaction, including the pay-off of AAG’s existing debt arrangements, with approximately $2 billion of debt financing.  This will include the combination of new term loan agreements, new multi-currency debt and an upsized revolving credit facility

 

We’ll have more analysis on this breaking story soon.

 

 

 

 

 

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IAAF CONFERENCE SPEAKERS ANNOUNCED

IAAF CONFERENCE SPEAKERS ANNOUNCED

The proceedings for the IAAF’s Annual Conference are well underway with a variety of industry speakers set to take centre stage and discuss the ‘real’ issues affecting the aftermarket, post Brexit.

So far, confirmed speakers include Dr. Julia Saini (Frost and Sullivan), Allistair Preston (whocanfixmycar) as well as Steve Nash (IMI), Olaf Heffing (Mahle) and more. The event will be facilitated by racing car legend Johnny Herbert who will help debate other topics on the federation’s agenda including the Connected Car and the government’s recent announcement for the abolishment of petrol and diesel vehicles by 2040.

IAAF Chief Exec Wendy Williamson said, “The expertise, experience and insight provided by our speakers will, I believe, feature in the future strategic planning of all those that attend”, she added. “We’re looking to the future, but we also recognise the pressures faced by our members today and will aim to provide some clarity and insight into these challenges”.

This year’s conference will take place at the Players Suite, Double Tree by Hilton on Thursday 7th December. For those invited, don’t forget your black tie!

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KEEPING A CAP ON THE PRESSURE

KEEPING A CAP ON THE PRESSURE

Times are changing in the radiator business, but Nick White has adapted.

NRG is the only radiator shop in Leeds.

There was a time when every market town in the land had a couple of independent radiator reconditioners, or at least a branch of a national chain such as Serck Marston. However, time moves on. “Reconditioning of car radiators is a dying industry” said Nick White, proprietor of Leeds- based Northern Radiators. “Radiators used to be copper and brass so you either went to the main dealer for a new one, or came to us to recondition it. Now the tanks are plastic, there is not the need”.

“The factories can just stamp out the plastic tanks and that’s what they do in China”. White adds that because some of these companies supply the public directly through auction sites, trying to import and compete in this sector is a waste of effort. “There’s more profit in selling the radiator cap on eBay than there is selling the whole unit” he remarked glibly.

However, where there’s brass, there’s more brass (as the old Yorkshire saying almost goes) and Northern Radiators has cut out a niche for itself in remanufacturing heavy duty and specialist rads that do still have heavy metal construction. “We do both corporate and private accounts, from councils and airports to people with classic cars” White explains, and to demonstrate the fact we went and had a look at the workshop’s ‘in tray’. Straight away we noticed some familiar-looking classic references, apparently from a Ford Cortina and a Triumph Vitesse, while another customer dropped off a radiator from his Rolls-Royce as we were speaking.

RANGE
Alongside these rads sat some more heavy-duty ones, apparently from fork-lift trucks, while another couple of huge and ancient-looking units waited, which had apparently come from backup generators in the basement of a building somewhere. Apart from cooling system radiators, the firm can also supply and recondition oil coolers, intercoolers and heater matrixes. It also offers a service to repair fuel tanks and sump pans.

Despite White’s earlier dismissal of new replacement rads, the firm does stock a number of quality performance parts from suppliers Mishimoto and Koyo, mainly as upgrades over OE for vehicles such as Subaru Impreza and Mitsubishi Evo. These high-end parts are bought by enthusiasts and command a reasonable margin.

While the firm has been at its current 3000 sq ft location for a few years, it dates back much further. In fact, the business was started in 1920. After the second world war, Nick White’s father Paul started his own radiator company following demobilisation. He acquired Northern Radiators in 1948. Now 94 years old and retired he still takes an active interest in the company. Northern Radiators was set up as a company in 1920. My father had come out of the army and started is own radiator company after the war and acquired Northern Radiators in 1948. He’s name is Paul White and he is 94 and still alive” said White.

TRADITION
Another traditional aspect of the business is the way in which radiators are recored which could make a fascinating article of its own, but in short involves quite a lot of hydrochloric acid and radiators tested under pressure. “The principal remains exactly the same” agrees White. “With modern health and safety we are a bit more switched on than a traditional operation, but radiators are very similar”.

And according to White, it will continue to be radiators at the ‘core’ of the business for a while yet. “We’ve tried various other things but we always keep coming back to radiators. At the moment we are very busy on radiators, just seven people. We are lean and mean and it is manageable” he concluded.

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KNOW YOUR LIMITS: SET AN ALCOHOL POLICY

KNOW YOUR LIMITS: SET AN ALCOHOL POLICY

What is the best policy for booze in the workplace?

Sensible policies for alcohol at work are encouraged

Do you have a policy on alcohol in the workplace? If you don’t then you are hardly unusual as most British companies either don’t have anything written at all, or they swing the other way and have an absolute zero-tolerance policy… which may or may not be enforced.

However, you should have a policy in place and have the means to enforce it. As the trend for fines for corporate manslaughter and injury continues to significantly increase across the UK, the emphasis on employers to operate strong and effective health and safety policies and practices has never been more vital.

KNOW THE LAW
Aside from drugs and alcohol costing British businesses in excess of £6 billion per year in lost productivity, under the Transport and Works Act 1992 it is a criminal offence for any worker to be unfit to operate due to drink or drugs and employers must show due diligence to prevent such offences from occurring in the workplace.
Laws that relate to drink- driving are of special interest to motor factors or any other business that has a van fleet. Don’t forget that limits vary within the UK with England, Wales and Northern Ireland having the highest permitted limit of 35 micrograms per 100ml of breath, compared to Scotland’s reduced limit of 22 micrograms, which is in line with the majority of the rest of Western Europe.

BEST PRACTICE
Of course, these limits are perhaps moot if your company has an absolute zero policy on alcohol. However, such a policy might not actually be the best plan. Suzannah Robin, a Director at breathalyzer maker AlcoDigital said: “One of the first steps in setting best practice policy is deciding a company alcohol limit. There will be many factors determining what this should be and it will very much depend on your business operations, however, we would always recommend that an employer sets the limit below the current legal drink-driving limit rather than at a dead zero”.

“Whilst zero may sound like a target every business should be aiming for, it can also cause issues where there may be discrepancies in results, caused by things such as liquor in chocolates or alcohol in medicines. Instead, using a scale of differing limits to determine the next steps an employer should instigate in the event of a positive alcohol test will provide staff with a clear set of rules and help to avoid any unjustified gross misconduct disciplinaries” she added.

EVIDENCE
If a company intends to screen staff on a regular basis it can use a Home Office approved breathalyzer. However, should a screening test reveal a positive result, a company will be obliged to re-test the employee.

Of course it isn’t just about the type of equipment being used, but also how the procedure is carried out and followed through. This means making sure staff implementing alcohol workplace policy have the sufficient training to perform such tests fairly and effectively. Robin explained: “If an employer does not follow best practice policy this can cause issues further down the line, particularly if an employee has tested positive for alcohol. Therefore, professional and reliable training is absolutely crucial for those being assigned to implement alcohol testing policies in the workplace.”

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BREAKING: THE PARTS ALLIANCE ACQUIRES BBC SUPERFACTORS

BREAKING: THE PARTS ALLIANCE ACQUIRES BBC SUPERFACTORS

Business group The Parts Alliance has acquired long-term affiliate member BBC Superfactors.

The seven-branch chain was established thirty years ago by Gary Shulman and Peter Rostron and initially covered the Blackburn, Bury and Chorley areas, hence the name.

“Combining the dedication of our loyal staff team with the expertise of The Parts Alliance has proved to be a winning formula for us over several years,” said MD Gary Shulman.  “We’re excited to now strengthen this relationship to ensure our business continues to thrive long into the future.”

“Since joining The Parts Alliance in December 2012, BBC have posted consistent double-digit annual sales growth and have invested to achieve industry-leading service levels. We are very pleased to welcome our BBC colleagues in the team,” stated Peter Sephton, President and CEO, European Automotive Group.

File pic of team at Blackburn branch

“This acquisition strengthens our position in the UK market and underlines The Part Alliance’s capability of driving growth both organically and through acquisitions,” added Henry Buckley, President and CEO of the PA’s Canadian parent company, Uni-Select.

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CMA LATEST: CERTAIN ANDREW PAGE BRANCHES ‘DAMAGE COMPETITION’

CMA LATEST: CERTAIN ANDREW PAGE BRANCHES ‘DAMAGE COMPETITION’

The Competition and Markets Authority (CMA) has provisionally found that the purchase by Euro Car Parts of much of the Andrew Page business could ‘damage competition in 10 local areas’.

Euro Car Parts bought most of Andrew Page in October 2016, after the latter went into administration. Following a complaint, a group of independent panel members at the Competition and Markets Authority (CMA) has investigated the merger. The group identified 10 local areas in England where the two companies were close competitors and where the merger could result in reduced competition for local customers, leading to higher prices or a lower quality of service.

The 10 areas mentioned in the draft are:

  • (a) Blackpool;
  • (b) Brighton;
  • (c) Gloucester; 
  • (d)  Liphook;
  • (e)  Scunthorpe;
  • (f)  Sunderland;
  • (g)  Swindon;
  • (h)  Wakefield;
  • (i)  Worthing; and
  • (j)  York.

The group did not consider that national or multi-regional customers would be adversely affected by the merger.

Professor Alasdair Smith, Inquiry Chair, said: “Andrew Page was in administration and would have closed down if a purchaser had not been found. The only two other purchasers would have bought a much smaller number of depots. We think that in most markets the merger will not further reduce competition compared to the alternative. However, in 10 local areas we are concerned that a reduction in competition could lead to higher prices and a lower quality of service.

In addition to the summary of provisional findings and the provisional findings report, a notice of possible remedies has been issued today, which outlines the measures the CMA could take if it still believes the merger would reduce competition when it makes its final decision. This identifies that competition could be maintained if Euro Car Parts sells depots in the 10 affected areas.

Anyone wishing to respond to the notice of possible remedies should do so in writing by no later than 28 September 2017. Anyone wishing to respond to the provisional findings should do so in writing, by no later than 5 October 2017.

More on this fast-moving story as soon as we get it – Ed

 

 

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AUTOMECHANIKA BIRMINGHAM 2018 LAUNCHED

AUTOMECHANIKA BIRMINGHAM 2018 LAUNCHED

The preparations for next year’s Automechanika Birmingham are underway, with Show Director Simon Albert confirming that ‘over 300’ exhibitors have signed up so far.

Following a summer of touring the country and talking to exhibitors, the organisers are planning a number of new initiatives for the show. “One of the main things is improved networking” said Albert. “For exhibitors we are going to have a ‘facilitated meetings’ programme, so you can make appointments to have meetings with visitors on your stand”. He added that the event will host a network evening, where exhibitors and certain visitor groups can talk shop with each other.

2018 will also see a renewed focus on workshops. “We are also looking at garages, and we have had a lot of requests asking that the event caters more for them, so we are extending opening hours one evening, as we are aware that shutting their businesses early or all day is a barrier” said Albert. “Plus, garages will have their own dedicated hall, Hall 19. They can meet all of the tools and equipment manufacturers and they can certainly get a good return on investment on their day”.

Following the 2018 show, the orgainisers have announced plans to make the show a biennial event. Keep a lookout for the October CAT for more info.

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GET YOUR THERMALS ON

GET YOUR THERMALS ON

Ceramic coating process in action.

Oxford-based Zircotec’s ceramic heat shielding technology was first developed for the nuclear industry during the 1970’s when the manufacturer was still part of the UK Atomic Energy Authority. But after a management-buyout in 2008, the terms and conditions of becoming a Limited corporation meant the firm would have to relocate from its nuclear license site in Harwell and that’s what the team did, setting up an independent operation at their new digs in Abingdon seven years ago.

One of the employees that assisted with this buyout was Zircotec MD Terry Graham, who was keen to talk about the the firm’s latest multi-cloured offering Performance Colours. “Many aftermarket firms purchase these, because if they’re spending large amounts of money on modifying a vehicle and adding fittings to engine compartments, the coating will protect those extra features that they’ve installed”. He adds that the robust design eliminates the need for exhaust wraps. Although these components look pleasing enough, it’s the thermal barrier protection that is why people buy it as exhaust surface temperatures are reduced by a third.

PRODUCTION
The first thing you need to know when entering the facility is that you’ll not find the team with brushes and pots of emulsion to hand. Instead, expect high tech machinery and designated workstations designed for the electrolysis process right up to inspection and distribution. To facilitate this, the warehouse incorporates a masking lab, four grit blasters as well as three spray booths and several baking ovens for those colour specifications to set before ending up in Zircotec branded packaging.

Our first checkpoint was the delivery room filled with tailpipes, turbochargers and manifolds sent in from workshops and OEMs. Once the order is logged, it enters the masking lab next door where parts are carefully marked-up on customer request. Explaining the reasons for this, Graham said. “Customers don’t want coatings on certain parts such as the slip joints or serial number. This is because the coating has a certain thickness (0.3mm to be exact) so if we applied it on these parts, they wouldn’t fit together properly”.

The component then enters a grit blaster machine to smoothen its surface before ending up in one of three plasma spray booths where a metallic-based bond coating is applied for secure adhesion between the ceramic and substrate. Two hours after the operation, the product re-enters the booth so the ceramic coating can be ‘welded’ on. “With intense processes and temperatures, people ask us if we ever damage the pipe, and the answer is that we don’t”, Graham replied. “We are in effect ‘welding’ liquid metal or ceramic that we’re firing to the pipe. Each particle welds itself in place but doesn’t damage the pipe” adding that the spray gun melts the ceramic particles at 10,000°c and twice the speed of sound, which would explain the screeching noise coming from the booths.

For its Carbon Composite and Performance White coatings, Graham notes that parts coming in for this service will receive a similar setup in order to provide thermal protection for glass fibre, plastics and composite materials through its Thermohold formulation. Of course, working under any of
these intense conditions means staff are kitted out in the correct clothing, eye and ear protection before the finished article receives its final checks.

BRANCHING OUT
A new test facility is currently in its mock-up stage and will be completed later this year. As for the Performance Colour Range, the team are scratching the imagination with new and vibrant colours to replace some current ones in order to keep the line fresh and competitive.

In addition to this, the business has taken on some more projects from OEMs and has objectives to develop its exhaust coating portfolio and distribution networks overseas. “Our aim is to start testing out coatings in different arrangements and getting further improvements to the performance of them” Graham said. “Quite often are aftermarket customers don’t buy on performance so I’d like to obtain some more data and relay it back to them. We do quite a lot of work for these companies but there is still much more to be had” he concluded.

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DRIVING CHANGE: HOW COMPLACENCY CAN KILL

DRIVING CHANGE: HOW COMPLACENCY CAN KILL

Driving for work is a ‘work activity’ like any other. However, our familiarity and, in some cases complacency, with the activity can make it difficult to manage despite it being one of the greatest risks we face. With the trade running fleets of delivery vehicles, the issue of road safety should be high up on the agenda. Indeed, it’s not hard to find web-hits such as ‘Van driver hurt in crash’ or ‘Truck, lorry and van driver injury compensation claims’.

THE LAW
There is a raft of criminal offences that capture individual drivers who decide to break the law. These include death by dangerous driving, careless driving and driving without a valid licence or insurance. The law recognises that properly licensed drivers have a personal obligation to take care of themselves and others on the road.

However, organisations, managers and colleagues could also be implicated if they are considered to have “aided and abetted” that criminal behaviour. A potential example of this would be where a manager
knew that a driver’s insurance had expired but did not alert anyone within the business or prevent that individual from driving. Organisations often collect vast swathes of information that are relevant to managing driving, but are not used as such. Working time details, health information and job descriptions are all good examples.

Prosecutions for ‘aiding and abetting’ offences remain rare, but a fatal road death may result in a Coroner’s Inquest and the organisation having to answer some difficult and probing questions on behalf of the deceased’s family.

Within the more typical health and safety arena, prosecutions could arise where the culture of the organisation is such that driving for work is not managed properly and individuals are put at risk.

In fatal incidents, under the Corporate Manslaughter and Corporate Homicide Act 2007, an organisation can be held liable if “working regimes, dangerous or illegal practices or negligence have contributed to the death”. The police will investigate for the offence of corporate manslaughter and will want to establish the attitude of senior management towards managing driving for work. Were policies in place and enforced, and was there real and visible leadership from the top?

Further, the Health and Safety at WorkAct 1974 states that organisations have a duty to ensure, so far as is reasonably practicable, the health and safety of all employees while at work, and that others are not put at risk by work-related driving activities.

Beyond the broad 1974 Act there are various other health and safety regulations that apply to work activities such as driving. The key action point is to appreciate driving for work as a work activity and treat it as you would any other, providing suitable instructions, information and equipment based on a sound risk assessment process.

CONSEQUENCES
The most obvious consequence of getting it wrong is that an employee or members of the public is seriously injured or killed as a result of your organisation’s driving activities. Organisations recognise the moral reasons for keeping people safe.

In addition, there is the risk of a subsequent prosecution for individual criminal offences or for organisational or management failures.

The potential consequences of getting health and safety management wrong have become all the more severe since February 1 2016, which saw the introduction of a Sentencing Guideline for health and safety offences and corporate manslaughter (among others) and creates the potential for higher fines and prison sentences than we have seen historically. The guideline uses ‘potential harm’ as one of the determinants when deciding upon a sentence; the potential harm associated with driving is obvious.

In addition to a criminal prosecution, you may have to deal with any civil claims brought against the business by individuals who have been involved in an incident. Insurance may be in place for organisations and those that use company cars, but what about those who use their own vehicles? Everyone ‘driving for work’ needs to have ‘business use’ insurance. Without it, insurance policies can be revoked and the individual or organisation is left to pay.

Aside from financial implications, incidents and prosecutions can attract significant negative publicity, which in turn could affect an organisation’s brand and reputation. Many vehicles now bear corporate logos and branding which can have unwanted consequences in the event of a serious incident. The impact of an investigation can also create significant business interruption, with the seizure of vehicles, computers and other records, even if a prosecution does not result.

Driving for work can be a risky business and should be taken seriously by the whole organisation; not just the driver.

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LDS ACQUIRED BY GROUPAUTO PARENT

LDS ACQUIRED BY GROUPAUTO PARENT

LDS website

South Wales-based motor factor LDS appears to have been acquired by Alliance Automotive Group, parent of Groupauto.

Neither party has issued a statement as of yet (AAG usually issues quaterly round- ups of its activities) however, Companies House Lyndon Smith, Louise Smith and Wayne Thomas were terminated as Directors in July, while John Coombes, the Finance Director at Alliance Automotive Group was appointed Director on the same day. Additionally, the registered office details have been changed to AAG’s Birmingham HQ.

LDS was formed in 1990 and the first branch was in Barry. Over the years the company grew to three branches, the largest of which was a new site in Barry measuring 19,000sq ft. A merger in 2014 with factor Normag led to the creation of a branch called LDS Normag. At the time of writing, the chain consists of 30 vans and 60 staff. It has enjoyed a good relationship with Groupauto, winning the coveted ‘Member of the Year’ award in 2014.

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