LKQ to buy German car parts retailer Stahlgruber in $1.8 billion deal

(Reuters) - U.S. auto parts retailer LKQ Corp LKQ.O said on Monday it would buy German peer Stahlgruber for about 1.5 billion euros ($1.8 billion), including debt, to consolidate its dominant position in the European market.

Stahlgruber will help Chicago-based LKQ withstand intensifying competition from rivals including U.S.-based Genuine Parts Co GPC.N, which in September announced its foray into Europe with a $2 billion deal to buy Alliance Automotive Group.

The deal values Stahlgruber at 11.9 times its 2017 earnings before interest, tax, depreciation and amortization (EBITDA), a source familiar with the matter said - in line with LKQ’s own valuation, but at a discount to Genuine Parts’ valuation, which is at 13.2 times EBITDA, according to ThomsonReuters data.

Stahlgruber, which sells car replacement parts, tools and other accessories, will also complement LKQ’s portfolio of vehicle engines, axles and wheels.

LKQ is the No.1 parts distributor by billings in the roughly 68-billion-euro European light vehicle aftermarket. It has expanded on the continent mainly through acquisitions and most recently bought Rhiag-Inter Auto Parts Italia S.p.A for $1.1 billion two years ago.

It expects to complete its purchase of Stahlgruber late in the first quarter or early in the second quarter of 2018, subject to regulatory approvals.

LKQ plans to fund the acquisition with debt offerings, its credit facility and by issuing 8.1 million new LKQ shares to Stahlgruber Otto Gruber AG, Stahlgruber’s owner.

Reuters reported in September that Stahlgruber’s family owners had put the car parts retailer up for sale and had selected bidders including LKQ.

The source said Stahlgruber expects its revenue to increase to 1.6 billion euros in 2017, from 1.5 billion last year, while its EBITDA is set to grow to 128 million euros from 121 million.

Deutsche Bank advised the family owners of Stahlgruber on the deal, while Bank of America and Credit Suisse advised LKQ.

Reporting by Sanjana Shivdas in Bengaluru; Additional reporting by Arno Schuetze in Frankfurt; Editing by Sai Sachin Ravikumar and Susan Fenton