Parts Merger: O'Reilly Automotive Buys CSK Auto (ORLY, CAO)

Cars and Drivers

Published: April 1, 2008 7:47 am

Last Updated: March 26, 2020 11:34 am

O’Reilly Automotive, Inc. (NASDAQ: ORLY) has announced that it and CSK Auto Corporation (NYSE: CAO) have signed a definitive merger agreement.

O’Reilly will acquire CSK in a transaction valued at approximately $1 Billion, after the inclusion of approximately $500 million of debt. CSK shareholders will receive $11.00 in payment via O’Reilly common stock, on terms subject to a price collar, and will receive $1.00 in cash for each share of CSK.

Based on an exchange ratio equal to $11.00 divided by the average trading price of O’Reilly common stock will be based upon the five trading days ending two trading days prior to the consummation of the exchange offer plus $1.00. If the average trading price of O’Reilly stock is above than $29.95, then the exchange ratio will equal 0.3673; and if the average trading price is less than $25.67, then the exchange ratio shall equal 0.4285.

O’Reilly said this will be modestly accretive to O’Reilly’s earnings per share in fiscal year 2009, and the cost savings are expected to be approximately $100 million annually beginning in fiscal year 2010. O’Reilly has a commitment for $1.2 billion in asset based revolving credit with Bank of America and Lehman Brothers Inc.

The boards of directors of both companies have already approved the transaction.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at [email protected]; he does not own securities in the companies he covers.

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