(Bloomberg) -- Carlyle Group Inc. is acquiring Advance Auto Parts Inc.’s Worldpac unit for $1.5 billion, striking the first major industrial investment for the firm in more than two years.
Worldpac, a wholesale distributor of original equipment replacement parts, generated about $2.1 billion in revenue for the 12 months ended June 30, according to a statement on Thursday that confirmed an earlier Bloomberg News report.
Advance Auto Parts has been under pressure from shareholder activists to divest the Worldpac unit to improve compensation to better compete with AutoZone Inc. and O’Reilly Automotive Inc. In November, Advance Auto Parts said it was initiating a sale process for Worldpac, as well as the Canadian business under the Carquest banner.
Shares of Raleigh, North Carolina-based Advance Auto Parts dropped as much as 14% in premarket trading on Thursday after the company said it would cut its net sales forecast for the year. It said it now expects comparable store sales to be flat to down 1%, rather than flat to up 1%. The stock was down 8% in the last year through Wednesday and is worth only about a fourth of its peak in 2021.
“The next chapter of our strategic and operational review will now focus on the remaining Advance business, with the goal of improving our sales trajectory and the productivity of all our assets to deliver stronger returns for our shareholders,” Shane O’Kelly, president and chief executive officer of Advance Auto Parts, said in a statement accompanying the group’s second quarter results.
For Worldpac, the company stands to benefit as cars — and their maintenance — become increasingly complex and older vehicles continue to add mileage.
“This industry is in particular very resilient because it’s not tied to new car production,” said Martin Sumner, Carlyle’s head of global industrial & transportation. “It’s tied to the car parc, which is huge and continues to age.”
Carlyle has invested about $13 billion in industrial carve-outs over the past two decades, including in companies such as Nouryon, Axalta, Atotech, Signode and Allison Transmission, according to the statement. One of Carlyle’s last transactions in the sector was its 2022 investment in food processing and packaging equipment maker Duravant, according to its website.
In a carve-out transaction announced last week, Carlyle agreed to acquire Baxter International Inc.’s kidney care business for $3.8 billion.
Centerview Partners is serving as financial adviser to Advance Auto Parts on the Worldpac deal. Bank of America Corp. and BMO Capital Markets are working with Carlyle.
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