O'Reilly Automotive Inc. has submitted a cash offer to acquire Genuine Parts Co.'s automotive division, according to individuals briefed on the discussions, as the latter aims to concentrate on its industrial operations. The transaction could be valued at $10 billion or more, these sources said, requesting anonymity due to confidentiality.
With more than 10,000 global locations, the unit generated over $15 billion in sales last year.
O'Reilly Automotive, headquartered in Springfield, Missouri, operates as a specialty retailer of automotive parts and accessories in the US. The company's stock has risen 1.4% year-to-date, resulting in a market capitalization of approximately $77 billion. Genuine Parts Co. has a market value of about $16 billion.
This acquisition would be O'Reilly's most significant transaction since its roughly $1 billion purchase of CSK Auto Corp. in 2008, per Bloomberg-compiled data.
Shares of Atlanta-based Genuine Parts have slipped 3.5% this year.
In February, Genuine Parts disclosed that it had retained JPMorgan Chase & Co. and Guggenheim Securities as advisers to divest its automotive division and transform into a dedicated industrial firm. This step followed a cooperation deal with activist investor Elliott Investment Management.
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In February, CEO Will Stengel stated that dividing the businesses "sharpens customer and market alignment, increases clarity and speed, simplifies operations and enables disciplined, business-specific investments to unlock long-term value."
This bid arrives amid a turbulent period for the auto sector, facing elevated expenses, economic unpredictability, and consumer affordability issues. Investors have shown preference for distributors with less complex holdings. Post-separation, Genuine Parts would consist solely of its worldwide industrial division, branded Motion.
That business focuses on industrial upkeep and repair. Last year, that segment generated roughly $9 billion in revenue.
The auto-parts unit generated more revenue than the industrial business.
An announcement regarding a possible sale could come before summer's end. Genuine Parts may ultimately choose to retain the division or spin it off independently of O'Reilly. Additional bidders might also surface.
O'Reilly's market capitalization of roughly $77 billion gives it ample financial firepower for a deal of this size, while Genuine Parts' relatively modest $16 billion valuation reflects the market's cautious outlook on its current structure.
The proposed deal comes as O'Reilly seeks to capitalize on its strong balance sheet and expand its market share in the automotive aftermarket. O'Reilly's previous major acquisition was the $1 billion purchase of CSK Auto Corp. in 2008, and a deal of this magnitude would be transformative. Meanwhile, Genuine Parts' decision to sell its auto division follows pressure from activist investor Elliott Investment Management, which pushed for the separation to unlock value. The auto-parts unit's $15 billion in revenue far exceeds O'Reilly's own sales, making the acquisition a leap in scale.
If completed, the combination would create a dominant player with a vastly expanded store network and purchasing power. Genuine Parts' automotive arm operates more than 10,000 locations globally, primarily under the NAPA Auto Parts brand, while O'Reilly runs roughly 6,000 stores in the U.S. Integrating these networks would require significant operational planning, but could yield substantial cost synergies in supply chain and logistics.
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