Essendant And Genuine Parts' S.P. Richards Business To Combine

Essendant (ESND) and Genuine Parts Co. (GPC) announced Thursday that they have agreed to combine Essendant with Genuine Parts' S.P. Richards business.

The companies said Essendant and S.P. Richards will form a stronger, more competitive business products distributor with greater scale and service capabilities and an enhanced ability to support customers.

The deal creates a company with pro forma 2017 net sales of about $7 billion, $300 million in adjusted EBITDA, 4.2 percent adjusted EBITDA margins.

The combined company is expected to unlock more than $75 million in annual run-rate cost synergies and more than $100 million in working capital improvements.

The combined company expects 90 percent of the cost synergies to be realized within two years post-closing and to incur less than $50 million in one-time cash costs to realize the synergies.

The deal, unanimously approved by the Boards of Essendant and Genuine Parts, is expected to close by the end of 2018, primarily subject to regulatory and Essendant shareholder approvals. The deal is expected to be tax free to the companies' respective shareholders.

The deal is structured as a Reverse Morris Trust, in which Genuine Parts will separate S.P. Richards into a standalone company and spin off that standalone company to Genuine Parts shareholders, immediately followed by the merger.

The deal implies a valuation of S.P. Richards of about $680 million, reflecting the value of the Essendant shares to be issued at closing plus one-time cash payments to Genuine Parts of about $347 million, subject to adjustments at closing.

Ric Phillips, Essendant President and CEO, will lead the combined company, and Janet Zelenka will serve as CFO. S.P. Richards President and CEO Rick Toppin will be appointed Chief Operating Officer of the combined company to be named Essendant.

Essendant Chairman Charles Crovitz will serve as Chairman of the Board of the combined company. He will be joined by three Essendant-appointed Directors, four Genuine Parts Company-appointed Directors, and four Directors appointed by mutual agreement.

Upon closing, Genuine Parts shareholders will own about 51% and Essendant shareholders will own about 49% of the combined company on a diluted basis.

For comments and feedback contact: editorial@rttnews.com

Business News

Follow RTT