By Jeff Sanford
Toronto, Ontario — June 5, 2017 — Tuesday Ticker rounds up the financial news in the automotive claims economy. In this week’s edition, we look at the end of PPG’s attempted takeover of AkzoNobel (for now), how Uni-Select has purchased one of the UK’s largest parts providers, 3M is looking into connected roadways and much, much more!
Uni-Select
– Quebec-based Uni-Select has made a bold move into Europe by establishing a “third pillar” to its business. The company announced that it had acquired the second largest independent automotive parts distributor in the UK. The company has entered into an agreement with Hg Pooled Management Limited (and other minority shareholders) to acquire 100 percent of the shares of PA Topco Limited, which does business as The Parts Alliance.
The Parts Alliance is the second largest independent distributor of automotive aftermarket parts in the UK. Uni-Select will acquire the company through its wholly-owned UK subsidiary for about $355.3 million CAD. The transaction will be fully funded with debt.
“We are excited to establish a third growth pillar in the large UK parts aftermarket that is expected to be immediately accretive in a market with great upside potential from future consolidation opportunities,” said Henry Buckley, President and CEO of Uni-Select. “Our two companies are a perfect fit in terms of business profile, customer focus, entrepreneurial culture and commitment to people development.”
Parts Alliance is headquartered in Solihull, England, and has “grown rapidly in recent years to become the second largest player in the UK automotive aftermarket parts market with an approximate 7 percent share,” according to a press release. The company services over 23,000 customer accounts through 161 corporate stores and 38 locations,” according to the release. The acquisition represents a new “third pillar” for the company to complements its existing segments, Canadian Automotive Group and FinishMaster US. Peter Sephton, President and CEO of Parts Alliance, will join Uni-Select’s executive team while continuing as President and CEO of the European business segment.
– Uni-Select also recently named a new President and Chief Operating Officer for its Canadian auto group. Brent Windom takes over the positions on July 3 of this year. He takes over from Gary O’Connor who will retire at the end of 2017.
AkzoNobel/PPG
– The AkzoNobel/PPG showdown seems to be over for now. PPG announced last Thursday it would give up its pursuit of the Dutch paint maker after almost three months. PPG CEO Michael McGarry was quoted in a statement as saying, “We believe it is in the best interests of PPG and its shareholders to withdraw our proposal to AkzoNobel at this time.” Under Dutch law, PPG may not make another offer until a six month cooling-off period has elapsed. AkzoNobel shares traded off slightly after the announcement. The major global business newspaper Financial Times ran a large feature summing up the drama of recent months. Some of the key points from the FT story as relating to PPG strategy going forward and through the attempted merger:
• “The retreat leaves PPG bereft of a large acquisition target it had long coveted and means Mr. McGarry must now find other ways to expand the Pittsburgh-based company.” According to an analyst quoted in the story, “He’s going to have to go down a path that’s more incremental and doesn’t necessarily have the same potential shareholder return.”
• “Although [the deal] came during a spree of consolidation that is reshaping both the $130bn global paints and coatings market and the wider chemicals industry, the timing of Mr. McGarry’s approach appeared flawed. The first bid, delivered during an informal meeting with his counterpart Ton Büchner, came less than two weeks before elections in the Netherlands. A political backlash against the proposed deal ensued, as tweets sent out by Akzo with the hashtag #DutchPride tapped into a growing sentiment against foreign takeovers.”
• “With its failure to tie up a deal with Akzo, PPG may face threats from competitors such as Axalta, spun out of Dupont, which are encroaching on its mainstay of automotive coatings, say analysts.”
• “The coatings market still remains relatively fragmented, so I do believe medium-to-long term there will be more consolidation,” said an analyst quoted in the story.
BASF
– BASF has announced it will increase prices for pigments worldwide. According to a press release, “… as contracts allow, BASF has increased prices for numerous pigments by up to 15 percent, worldwide.” The release goes on to say, “The price adjustments are necessary due to higher raw materials costs, such as for copper, TiO2 or cobalt, as well as further challenging environmental, health and safety costs.”
3M
– 3M is reported to be selling its electronic monitoring business to enable its “Transportation Safety Division to focus on connected roadways of the future,” according to a release. The story quotes John Riccardi, Vice President and General Manager, Transportation Safety Division, as saying, “We are focusing on the rapidly changing trends in transportation safety and mobility, which include the connected roadways of the future.” 3M will sell the business to an affiliate of Apax Partners, a global private equity advisory firm, for $200 million US. The transaction is expected to close in the third quarter of 2017.
Boyd Group
– The big news this week, of course, was the blockbuster deal that saw Boyd Group Income Fund buy up Assured Automotive. The deal is the biggest purchase on the part of Boyd to date and will have a large effect on the Canadian market. The deal expands Boyd’s Ontario locations to 69 from one and more than doubles its total presence in Canada, according to a story in the National Post. Also watch for a move east (including a foray into Quebec) led by the Assured management team. Investors seem to think the deal is a smart one. On May 26, units in the Boyd Group Income Fund were trading below $90. They are now trading just above $100. An analyst, Steve Hansen of Raymond James Financial, recently wrote in a note to clients that, “Boyd’s goal is to double 2015 revenue by 2020 through tuck-in acquisitions and possibly more large takeovers, though that target is looking ‘increasingly conservative’ and may need to be revised …”
Related Market Notes
– Fix Auto World announced this week that the company has closed the transaction to acquire the global rights of 11 automotive aftermarket companies. The acquisition was announced on April 4 and reported by Collision Repair magazine at that time. Fix Auto World is purchasing the assets from the Skidmore Group. All in, the deal will see the assets of Novus Glass, Novus Franchising, Speedy Auto Glass USA, TCGI Australia PTY, TCGI (Jersey), Novus, Windshields.Com, Transamerica Glass, Splashes Auto Spa, Shat R Proof Corp. and Windshield Doctor Canada transfer to Fix. The deal sees Fix Auto World’s global numbers climb to more than 2,000 franchise, retail, repair, affiliate, distribution and manufacturing locations in more than 40 countries around the world. A Fix Auto press release stated that the expansion into “new lines of business increases its value proposition to insurers and will help fuel partnerships with current and new supply partners around the world.” David Lingham, Head of Business for Fix Auto World, was quoted as saying, “The reaction from insurers has encouraged us that this acquisition will strengthen our ability to offer more products and services in a seamless way.”
– A report on The Verge notes that major US insurer AAA is “raising its prices for Tesla’s Model S and Model X, citing higher-than-average claim rates and repair costs for the two cars.”
According to the report, “AAA said it could raise its premiums by as much as 30 percent for the vehicles.” At the heart of the matter is a debate over “whether or not Tesla’s cars have a higher-than-average claim rate for crashes and collisions.” According to the report, “… these averages are calculated by comparing the number of claims with similar cars. In this case, the Model S and Model X are categorized as ‘large luxury vehicles’ — a class that also includes the BMW 5 series, Mercedes-Benz E class, Audi A6, and Volvo XC70. But, Tesla says, it’s ‘false and misleading’ to compare the Model S and X to the likes of a Volvo station wagon, pointing out that its cars have faster acceleration rates and better passenger safety.”
Nevertheless, according to the story, data from “the Highway Loss Data Institute (HLDI), suggests that luxury vehicles are more expensive to insure because they’re involved in more collisions than other cars (13 percent more) and cost more to repair (about 50 percent more). But Tesla’s vehicles stand out even among this crowd, says the HLDI, with Model X owners filing insurance claims 41 percent more than average, and with these claims costing 89 percent more than average to fix.”
