Genuine Parts Company GPC has agreed to sell its wholly-owned subsidiary EIS Inc., the Electrical Specialties Group of Motion Industries, to Audax Private Equity. The transaction is expected to close by the end of September 2019, subject to the satisfaction of customary closing conditions.
Genuine Parts Company is a distributor of automotive replacement parts that operates through three divisions — Automotive Parts, Motion Industries and S.P. Richards Company. In 2018, the company generated total revenues of more than $18 billion.
Audax partners with management teams with a proven approach to “Buy and Build”. This approach supports their management partners to execute add-on acquisitions, accelerate growth and optimize overall company operations to substantially increase equity value.
EIS is a well-established distributor of process materials, production supplies, specialty wire and cable as well as fabricated parts to more than 20,000 customers in the electrical OEM, motor, transformer, generator repair and assembly markets. The company has more than 110,000 SKUs and operates 38 branches and four fabrication facilities.
The sale of EIS indicates an additional step in Genuine Parts’ strategy to modify portfolio as well as strengthen focus on sustainability and value-driving initiatives. Further, the divestiture is expected to streamline the company’s operations, help it expand its global footprint and capitalize on its growth prospects. Given Audax's experience in leading industrial companies to attain next-level growth, it is expected to be the right partner for EIS. Audax will provide the expertise and resources to support the EIS leadership team as it continues to broaden its customer base, expand offerings and enhance service as well as support programs for the benefit of all EIS stakeholders.
Genuine Parts aims to utilise the funds from the above-mentioned transaction in a disciplined capital allocation strategy. The company’s use of net cash proceeds may include reinvestments in the business, repayment of debt, share repurchases and potential new dealership openings for organic as well as inorganic growth.
In the past six months, Genuine Parts has underperformed the industry it belongs to. During the same time frame, the company’s shares have declined 3.9% against the industry’s growth of 13.6%.
Zacks Rank & Stocks to Consider
Currently, Genuine Parts carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc. KMX and Gentex Corporation GNTX, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fox Factory has an expected long-term growth rate of 16.7%. In the past six months, shares of the company have rallied 20.7%.
CarMax has an expected long-term growth rate of 12.6%. In the past six months, shares of the company have risen 36.3%.
Gentex has an expected long-term growth rate of 5%. In the past six months, shares of the company have returned 29.5%.
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