Advance Auto Parts Announces Closing of Sale of Worldpac to Carlyle

Rhea-AI Summary

Advance Auto Parts (NYSE: AAP) has completed the sale of Worldpac, Inc. to Carlyle (NASDAQ: CG) for $1.5 billion, with estimated net proceeds of $1.2 billion after taxes and transaction costs. The transaction, initially announced on August 22, 2024, aims to simplify AAP's business model and strengthen its balance sheet. The company will provide updated strategic priorities and financial objectives for its blended-box business during its third quarter 2024 earnings call on November 14, 2024.

Positive

• Sale of Worldpac generates $1.5 billion in cash proceeds
• Net proceeds of $1.2 billion after taxes strengthens balance sheet and liquidity
• Business simplification through focus on core blended-box operations

Negative

• Divestment of Worldpac business unit reduces company size and revenue potential

Insights

Financial Analyst

The $1.5 billion sale of Worldpac to Carlyle marks a significant strategic shift for Advance Auto Parts, yielding net proceeds of $1.2 billion after taxes and costs. This divestment substantially improves AAP's balance sheet liquidity, particularly important given their recent financial challenges and dividend cut. The transaction enables debt reduction and operational restructuring focus.

The move to simplify operations by focusing on the core blended-box business model could improve operational efficiency, though it reduces revenue diversification. Investors should watch the November 14 earnings call closely for adjusted financials and margin expansion strategies, as these will be critical indicators of whether this strategic pivot can reverse AAP's recent underperformance in the competitive auto parts retail sector.

• Transaction strengthens balance sheet and liquidity with $1.5 billion of cash proceeds.
• Advance to provide an update on strategic priorities and financial objectives on November 14, 2024, in conjunction with third quarter 2024 results.

RALEIGH, N.C.--(BUSINESS WIRE)-- Advance Auto Parts, Inc. (NYSE: AAP), a leading automotive aftermarket parts provider in North America that serves both professional installers and do-it-yourself customers, today announced the close of the sale of Worldpac, Inc. to global investment firm Carlyle (NASDAQ: CG). The sale agreement was announced on Aug. 22, 2024 with a transaction value of $1.5 billion. The company estimates net proceeds of approximately $1.2 billion after taxes and transaction costs.

“The completion of the Worldpac transaction is a pivotal moment in the simplification of our business model,” said Shane O’Kelly, president and chief executive officer. “The sale enables us to focus on actions to strengthen our blended-box business, which will elevate the performance of our core operations, and support our goal of delivering consistent profitable operating results. We look forward to providing an update at our next earnings call on November 14.”

Advance Blended-Box Strategic Priorities and Financial Objectives

On Thursday, November 14, 2024, in conjunction with reporting third quarter 2024 results, the company expects to report adjusted financials for the Advance RemainCo continuing operations. In addition, the company plans to provide an update on strategic priorities to elevate the performance of the Advance blended box. The company expects that the disclosure of adjusted financials along with a strategic road map for expanding adjusted operating margin will provide a better understanding of the company’s future potential.

The company has scheduled a conference call and webcast to begin at 8 a.m. ET on November 14, 2024. The live webcast and related presentation materials will be available on the company’s Investor Relations website (ir.AdvanceAutoParts.com). To join by phone, please pre-register online for dial-in and passcode information. Upon registering, participants will receive confirmation with call details and a registrant ID. A replay of the conference call and webcast will be available on the company’s Investor Relations website for one year.

About Advance Auto Parts

Advance Auto Parts, Inc. is a leading automotive aftermarket parts provider that serves both professional installers and do-it-yourself customers. As of July 13, 2024, Advance operated 4,776 stores and 320 Worldpac branches primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. The company also served 1,138 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands. Additional information about Advance, including employment opportunities, customer services, and online shopping for parts, accessories and other offerings can be found at www.AdvanceAutoParts.com.

Forward-Looking Statements

Certain statements herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identifiable by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast, “guidance,” “intend,” “likely,” “may,” “plan,” “position,” “possible,” “potential,” “probable,” “project,” “should,” “strategy,” “will,” or similar language. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about the sale of Worldpac, including statements regarding the benefits of the sale, the expected use of proceeds and expectations for economic conditions, future business and financial performance of the company’s core blended box business, as well as statements regarding underlying assumptions related thereto. Forward-looking statements reflect the company’s views based on historical results, current information and assumptions related to future developments. Except as may be required by law, the company undertakes no obligation to update any forward-looking statements made herein. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements. They include, among others, the company’s ability to hire, train and retain qualified employees, the timing and implementation of strategic and other initiatives, deterioration of general macroeconomic conditions, geopolitical conflicts, the highly competitive nature of the industry, demand for the company’s products and services, the company’s use of proceeds and ability to maintain credit ratings, access to financing on favorable terms, complexities in the company’s inventory and supply chain and challenges with transforming and growing its business. Please refer to “Item 1A. Risk Factors” of the company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated by the company's subsequent filings with the SEC, for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241103820422/en/

Investor Relations Contact:

Lavesh Hemnani

T: (919) 227-5466

E: invrelations@advance-auto.com

Media Contact:

Darryl Carr

T: (984) 389-7207

E: AAPCommunications@advance-auto.com

Source: Advance Auto Parts, Inc.

FAQ

How much did Advance Auto Parts sell Worldpac for?

Advance Auto Parts (AAP) sold Worldpac to Carlyle for $1.5 billion, with net proceeds of approximately $1.2 billion after taxes and transaction costs.

When will AAP report its Q3 2024 earnings and strategic update?

Advance Auto Parts will report its Q3 2024 earnings and provide a strategic update on November 14, 2024, at 8 a.m. ET.

What is the purpose of AAP selling Worldpac?

The sale aims to simplify AAP's business model, strengthen its balance sheet, and allow focus on strengthening its core blended-box business operations.