Update: O'Reilly Automotive merges with CSK Auto
Automotive goods retails chains O’Reilly Automotive Inc. and CSK Auto Corporation have signed a merger agreement, making it the nation’s third largest automotive service company, according to the Wall Street Journal
In a transaction valued at approximately $1 billion, O’Reilly will acquire all outstanding shares of CSK Auto. Post-merger, O’Reilly will boast approximately 3,200 stores in its United States network.
“As a combined company, we will be even stronger and more competitive, with the ability to better meet the continuing evolution of the automotive aftermarket industry,” Greg Henslee, chief executive officer of O’Reilly Automotive, said in a statement.
Springfield, Mo.-based O’Reilly Automotive Inc. is a retailer of automotive aftermarket parts, tools, supplies and accessories for both professional and do-it-yourself consumers. The company operates 1,830 stores in 26 states.
Phoenix-based CSK Auto operates nearly 1,350 stores in 22 states under the Checker Auto Parts, Schuck’s Auto Supply, Kragen Auto Parts and Murray’s Discount Auto Stores banners.
Henslee said that the transaction is expected to close this summer, and following its completion, O’Reilly will eventually rebrand CSK Auto stores under its own banner.
“Consistent with our practices with previous acquisitions, ideally, we would plan to convert those brands to the O’Reilly name,” he said. “We dual brand for some time and then transition to the O’Reilly brand.”
Part of O’Reilly’s merger with CSK Auto is to evaluate the effectiveness of the various CSK brands in their respective markets, Henslee said. Following that analysis, O’Reilly will determine whether it is wise to consolidate the brands.
Henslee said that it is still too soon to tell whether CSK Auto employees will remain at the company or will join O’Reilly’s team, adding that there is always room for qualified employees at the combined company, and that the merger was less about cost-cutting and more about business improvements.
“Although there is still a detailed analysis that has to be done before we make our final determination, this transaction is about growth and improving our competitive position,” he said. “We are confident that the majority of CSK’s stores are in locations that would be suitable to our dual market strategy, including their heavy presence in Phoenix.”
In light of the merger, O’Reilly plans to slow its organic store growth this year. The company planned to open about 205 stores, but will instead open between 140 and 150 new locations.
According to Nielsen Monitor-Plus, O’Reilly Automotive spent about $9 million on media in 2006. About $4.1 million was spent on cable television ads, about $2.9 million was spent on spot radio ads and about $1.5 million was spent on spot television ads.
CSK Auto spent about $12.8 million on media in 2006, about $7.3 million spent on spot radio ads, about $3.7 million spent on local newspaper ads and about $1.1 million spent on spot television ads.
Keep both O’Reilly Automotive and CSK Auto on a prospects list if your firm has regional marketing capabilities that would benefit the company. Firms with direct marketing experience should present ideas to increase traffic to the dual branded stores or to freshly rebranded locations once they open. This may also be a good time for firms with branding experience to approach with a fresh new look for the stores.