Standard Motor Products, Inc. to Acquire European Aftermarket Supplier Nissens Automotive

Rhea-AI Summary

Standard Motor Products (SMP) announced the acquisition of Nissens Automotive for $388 million (€360 million), expanding their portfolio in Europe and North America. The transaction is expected to add $8-12 million in cost synergies within 24 months and immediately boost earnings per share. Nissens, a European leader in engine cooling and air conditioning products, generates $260 million in annual revenue with a mid-teens EBITDA margin. The deal values Nissens at approximately 7.5x EBITDA. The acquisition combines complementary product portfolios and geographic markets, aiming for revenue growth and operational excellence. The transaction is anticipated to close in the second half of 2024.

Positive

• Acquisition of Nissens for $388 million expands SMP's market presence in Europe and North America.
• Estimated $8-12 million in cost synergies within 24 months.
• Acquisition is immediately accretive to earnings per share in the first full year.
• Nissens generates $260 million in annual revenue with a mid-teens EBITDA margin.
• Deal value is approximately 7.5x EBITDA.
• Combined businesses expected to strengthen market position and accelerate growth through cross-selling and cost efficiencies.

Negative

• The transaction is subject to regulatory approvals which could delay the closing.
• Integration of Nissens might pose operational challenges.

Insights

Financial Analyst

The acquisition of Nissens by Standard Motor Products (SMP) presents significant financial implications. The $388 million purchase price, equating to 7.5x EBITDA, indicates that SMP is acquiring a potentially high-value asset, given the typical range for similar acquisitions. This suggests SMP is confident in Nissens' ability to generate substantial future earnings. Furthermore, SMP projects the acquisition will be immediately accretive to its earnings per share (EPS) in the first year, which is promising for investors as it implies that the deal will enhance shareholder value without delay.

From a strategic standpoint, the estimated $8-12 million in run-rate cost synergies within 24 months is noteworthy. These synergies are savings expected from the combined operations, which should improve the profitability of the merged entity. SMP also anticipates revenue synergies, which could arise from cross-selling opportunities and an expanded geographical footprint.

The acquisition also diversifies SMP's portfolio into powertrain-neutral product categories, which aligns with industry trends as companies seek to reduce reliance on traditional internal combustion engine (ICE) components due to the rise in electric vehicles (EVs). This could position SMP well in the evolving automotive landscape, enhancing long-term growth prospects.

Short-term: The transaction's immediate accretive nature and operational synergies are likely to positively impact SMP's financial performance and stock price.

Long-term: Diversification and enhanced market presence in Europe could provide sustained growth and stability amid the automotive industry's shift toward EVs.

Market Research Analyst

The merger of SMP and Nissens is poised to create a formidable player in the global aftermarket parts supply industry. Nissens' focus on thermal management products and vehicle control technologies complements SMP's existing portfolio, strengthening its position in both North America and Europe. This geographic diversification reduces SMP's market risk by not being overly dependent on a single region.

One of the strategic benefits includes leveraging Nissens' established European market presence. Given Nissens' reputation for high-quality products and strong customer relationships, SMP can significantly boost its market penetration and share in Europe. This expanded presence allows for more robust cross-selling opportunities and the introduction of SMP's products to Nissens' customer base.

The market for aftermarket automotive parts is highly competitive, but SMP's strategy to maintain Nissens as a standalone unit while integrating operations to achieve synergies is key. This approach helps retain Nissens' brand equity and customer loyalty, which are critical in this sector.

Short-term: Market expansion and operational synergies are likely to enhance competitiveness and market share.

Long-term: Geographic diversification and a comprehensive product portfolio can provide resilience against market fluctuations and industry shifts.

• Creates a global leader for aftermarket parts supply with a comprehensive product offering across vehicle control and thermal control products
• Expands SMP's portfolio of powertrain-neutral product categories
• Purchase price of $388 million represents approximately 7.5x EBITDA multiple inclusive of estimated run-rate cost synergies
• Will be immediately and meaningfully accretive in the first full year of the transaction
• $8-12M in estimated run-rate cost synergies within 24 months, with additional opportunity for meaningful revenue synergies

NEW YORK, July 10, 2024 /PRNewswire/ -- Standard Motor Products, Inc. (NYSE: SMP), a leading automotive parts manufacturer and distributor, announced it has reached a definitive agreement to acquire AX V Nissens III APS ("Nissens"), a leading European manufacturer and distributor of aftermarket engine cooling and air conditioning products with a growing array of vehicle control technologies, for approximately $388 million (€360 million) in cash from Nordic private equity firm Axcel and the Nissen family. Nissens has annual revenues of approximately $260 million with a mid-teens EBITDA margin rate.

Mr. Eric Sills, Standard Motor Products' Chairman and CEO, stated, "We are delighted to announce this acquisition, which will make our combined business the aftermarket leader in North America and Europe in thermal management products. It will also expand SMP's portfolio of powertrain-neutral product categories.

"We plan to continue operating Nissens as a stand-alone unit, while leveraging the combined strength of the two companies to realize both cost and revenue synergies.

"Founded in 1921, Nissens has a long history of being an aftermarket leader in Europe, with market-leading brand recognition and a reputation as a high-performing supplier of premium products. Led by Klavs Pedersen, Nissens' strong management team has demonstrated its ability to grow and thrive during challenging times. They enjoy deep market knowledge with well-established customer relationships and an operational infrastructure that has allowed them to penetrate all corners of the continent and beyond.

"We believe the combination with SMP is a powerful one. Both companies have a similar go-to-market strategy of supplying full-line professional grade product offerings, and enjoy complementary product portfolios. Meanwhile, the two companies largely operate in different geographic markets. As such, we believe that we are stronger together, capitalizing on synergies in both markets and strengthening our position in each. Together, we can accelerate growth through cross-selling our product offerings, realize cost reduction through combined resources, and achieve enhanced operational excellence though collaboration and best practices.

"Lastly, we believe that as two 100+ year old companies we have compatible business cultures and will work very well together. We welcome all of the Nissens employees to the SMP family."

Mr. Klavs Pedersen, Nissens' Chief Executive Officer, stated, "We are very excited to have SMP as our new owner. We have been following SMP's activities in the US, and we see a lot of similarities in the way SMP and Nissens operate in their respective focus regions. I have personally known the SMP management team for several years, and I believe there is a very strong cultural fit that will support and accelerate the positive development of both companies. We look forward to becoming part of the SMP family."

Transaction Details
The transaction values Nissens at approximately $388 million, representing approximately 7.5x Adjusted EBITDA after factoring estimated run-rate cost synergies at the mid-point of $10 million. The transaction is expected to be accretive to SMP's GAAP EPS in the first full year.

The transaction is expected to be completed in the second half of 2024, and is subject to certain closing conditions, including receipt of applicable antitrust and other regulatory approvals.

Transaction Conference Call Information
Standard Motor Products, Inc. will host a conference call at 11:00 AM, Eastern Time, on Wednesday, July 10, 2024 to discuss the acquisition of Nissens Automotive. This call will be webcast and can be accessed on the Investor Relations page of our website at www.smpcorp.com and clicking on the SMP Investor Call Webcast link. Investors may also listen to the call by dialing 800-225-9448 (domestic) or 203-518-9708 (international). Our playback will be made available for dial in immediately following the call. For those choosing to listen to the replay by webcast, the link should be active on our website within 24 hours after the call. The playback number is 888-562-0904(domestic) or 402-220-7346 (international). A copy of our presentation materials can be found at SMP Investor Presentation

Advisors
J.P. Morgan Securities LLC is acting as financial advisor, Hughes Hubbard & Reed LLP is acting as lead transaction counsel and Plesner Advokatpartnerselskab is acting as lead European counsel to Standard Motor Products. J.P. Morgan Bank N.A., Bank of America and Wells Fargo are providing committed financing for the funding of the transaction.

About Standard Motor Products
Standard Motor Products is the leading manufacturer and distributor of premium replacement parts in the automotive aftermarket and a custom-engineered solutions provider to vehicle and equipment manufacturers in diverse non-aftermarket end markets. Its automotive aftermarket business is comprised of two segments, Vehicle Control and Temperature Control, while its Engineered Solutions Segment offers a broad array of conventional and future-oriented technologies in markets for commercial and light vehicles, construction, agriculture, power sports, and others.

About Nissens Automotive
Nissens is the leading European supplier of thermal management and engine efficiency products fully focused on servicing the resilient and steadily growing independent automotive aftermarket. The Company operates with a distinct multi-brand strategy with offerings to passenger car as well as commercial vehicle applications. Nissens is headquartered in Horsens, Denmark and was founded in 1921.

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Standard Motor Products cautions investors that any forward-looking statements made by the company, including those that may be made in this press release, are based on management's expectations at the time they are made, but they are subject to risks and uncertainties that may cause actual results, events or performance to differ materially from those contemplated by such forward-looking statements. Among the factors that could cause actual results, events or performance to differ materially from those risks and uncertainties discussed in this press release are those detailed from time-to-time in prior press releases and in the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. By making these forward-looking statements, Standard Motor Products undertakes no obligation or intention to update these statements after the date of this release.

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SOURCE Standard Motor Products, Inc.

FAQ

What is the value of SMP's acquisition of Nissens Automotive?

SMP acquired Nissens Automotive for approximately $388 million (€360 million).

When is SMP's acquisition of Nissens expected to close?

The acquisition is expected to close in the second half of 2024.

How will SMP's acquisition of Nissens impact earnings?

The acquisition is expected to be immediately and meaningfully accretive to SMP's earnings per share in the first full year.

What are the expected synergies from SMP's acquisition of Nissens?

The acquisition is expected to result in $8-12 million in cost synergies within 24 months, with additional revenue synergy opportunities.

What is the EBITDA multiple for SMP's acquisition of Nissens?

The acquisition values Nissens at approximately 7.5x EBITDA.

What is the annual revenue and EBITDA margin of Nissens?

Nissens has an annual revenue of approximately $260 million with a mid-teens EBITDA margin.