By Jeff Sanford
Toronto, Ontario — May 8, 2017 — This week’s Tuesday Ticker looks at PPG’s latest offer for AkzoNobel, Uni-Select’s first quarter highlights including sales of $297.2 million and 17 new stores, AutoCanada’s acquisition of one of only three Mercedes-Benz collision centres in Quebec and much, much more!
– AkzoNobel has turned down another bid PPG, which has offered three bids now. The latest bid was in cash and shares and values AkzoNobel’s stock at “about 96.75 euros per share, or a 50 percent premium to the price before PPG’s interest became known on March 9 … PPG reckons it can achieve savings of $750 million thanks to factors such as economies of scale on production and lowering input costs,” according to a report by Reuters.
Various newspaper reports suggest AkzoNobel Chairman Antony Burgmans finally met PPG Chief Executive Michael Garry on Saturday in a meeting that was described as “cordial and respectful.” AkzoNobel management and board members had previously declined meetings with PPG officials.
AkzoNobel released an official statement on Monday morning, rejecting the latest offer on and outlining management’s reasoning. According to the statement, PPG’s proposal does not reflect AkzoNobel’s current and future value and claims that the PPG bid contains regulatory risks. “Recent transactions in the Paints and Coatings, or broader Chemicals sector, suggest the transaction would face complex regulatory hurdles that could take up to of 18 months to complete,” according to the statement. Presumably they’re referring to the Valspar/Sherwin-Williams deal.
The statement went on to state that it, “…has been clear since PPG submitted an initial proposal that anti-trust clearance would play a major part in the deliverability of the proposal, given the significant geographic and segment overlap that exists between the two companies … Furthermore, the acquisition of AkzoNobel’s Specialty Chemicals business conflicts with PPG’s stated strategy of exiting the Specialty Chemicals market.”
The sparkiest comments question the ability of PPG to carryout such a deal. Quoting from the statement again, “PPG has not undertaken an acquisition of this size and is unproven in terms of an integration challenge as complex as the one proposed. This acquisition would be around eight times the size of any previous acquisition conducted by PPG and more than three times the total value of acquisitions completed by PPG during the past decade.”
One thing seems certain at this point: this isn’t over yet.
– Uni-Select reported solid Q1 numbers this week. The Boucherville, Quebec-based company announced that sales for the quarter were $297.2 million, up 12.6 percent from the same period last year. Earnings came in at $23.2 million, up 6.8 percent. Free cash flow was $22.2 million (an increase of 14 percent compared to the same period last year). The dividend was raised almost 9 percent and management announced they had added 17 new stores to the network.
“We are pleased with our ongoing initiatives, in particular, our ability to acquire and successfully integrate select companies into our network, benefiting our sales and [earnings] growth. Our Canadian business experienced solid organic sales growth during the quarter in the corporate stores as well as with our independent customers excluding one independent member loss. Total sales of FinishMaster US were impacted, as expected, by the product line changeover,” Henry Buckley, President and CEO of Uni-Select, was quoted as saying. “Our free cash flows for the quarter increased, and we continue to be focused on optimizing our business” The
impressive growth in sales was “… generated mainly from recent US business acquisitions, resulting in additional
sales of $44.5 million or 16.8 percent.”
According to the release, “… organic sales were affected, as expected, by the product line changeover in the FinishMaster US segment while the Canadian Automotive Group was affected by a loss of an independent member. Without these impacts, the organic growth would have been positive.” Increases in free cash flow was mainly related to “improved operating income from accretive business acquisitions.”
– AutoCanada also reported its latest numbers and has announced a plan to spend almost $31 million this year on dealership relocations and expansions. Revenue over the quarter was $639,027 versus $666,872 the same period last year. Overall, the number of new vehicles being sold remained flat. According to the filings, the company sold 8,508 units in the first quarter of 2017 and 8,502 units in the first quarter of 2016.
According to the press release, “Finance, insurance and other, per vehicle retailed, has increased 3.7 percent year-over-year … Parts, service and collision repair gross profit remained flat at $47,284 in the first quarter, compared to $47,669 in the same quarter of 2016.”
“We are also excited about our recent acquisition of Mercedes-Benz Rive-Sud in Montreal which is an example of our acquisition strategy at work of adding new brands in metropolitan areas that further expand our dealer network and drive growth potential in major Canadian markets,” Steven J. Landry, President and CEO of AutoCanada, was quoted as saying.
Prior to this, Mercedez-Benz did not allow public ownership of its retail locations. Mercedes-Benz Rive-Sud is home to one of only three Mercedes-Benz approved collision centres in Quebec.
– Thomas C. Gallagher, Executive Chairman of Genuine Parts Company (GPC), last week informed the board of directors of his “decision to retire as an executive officer and employee of the company, effective June 30.” Gallagher will continue to serve as non-executive Chairman following his retirement. GPC is the parent company of UAP and NAPA.
– Axalta Coating Systems will, “serve multiple roles including presenter, exhibitor, and sponsor at the Future of Coatings Under Study (FOCUS) conference at the Michigan State University Education Center in Troy, Michigan on May 4, 2017.” Dr. Michael Koerner, Axalta Technical Fellow, will present on the rheology (the study of the flow of liquid matter) of automotive paint coatings. “The FOCUS planning committee accepted a challenge from key automotive OEM customers to expand the technical agenda and add an increased ‘focus’ on application technology. This year’s program is set to deliver on that challenge,” according to a source.
Axalta also opened its new headquarters office for India, located in Gurugram within the National Capital Region (NCR), last week. The new 35,000 sq. ft. facility will enable Axalta to integrate its corporate office and other key country business functions within a single office. The opening follows Axalta’s plant expansion plan in India announced in 2015.
