NEW YORK - Standard Motor Products, Inc. (NYSE: NYSE:SMP), an automotive parts manufacturer and distributor, announced the definitive agreement to acquire Nissens, a European manufacturer and distributor of aftermarket cooling and air conditioning products.
The cash transaction is valued at approximately $388 million and is expected to be completed in the second half of 2024, pending regulatory approvals.
The acquisition of Nissens, which generates annual revenues of around $260 million, is projected to be immediately accretive to SMP's earnings per share in the first full year post-transaction. The deal is estimated to yield $8-12 million in cost synergies within 24 months, with further potential for revenue synergies.
Eric Sills, SMP's Chairman and CEO, highlighted the strategic fit between the two companies, noting that the acquisition would establish SMP as a leader in the North American and European markets for thermal management products. Sills emphasized that Nissens would operate as a standalone unit while benefiting from the combined strengths of both companies.
Nissens, with a history dating back to 1921, is recognized for its market-leading brand and premium product offerings in European aftermarket parts. Klavs Pedersen, CEO of Nissens, expressed enthusiasm about joining SMP and noted the cultural alignment and operational similarities between the two companies.
The purchase price reflects roughly a 7.5x EBITDA multiple, inclusive of anticipated cost synergies. J.P. Morgan Securities LLC, Hughes Hubbard & Reed LLP, and Plesner Advokatpartnerselskab are advising SMP on the transaction, with committed financing from J.P. Morgan Bank N.A., Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC).
The acquisition announcement was supplemented by a conference call hosted by SMP to discuss details of the transaction. This information is based on a press release statement from Standard Motor Products.
In other recent news, Standard Motor Products, Inc. (SMP) reported mixed Q1 2024 results, marked by record sales but hampered by challenges in profitability due to inflation. The company's Engineered Solutions segment performed strongly, and a new distribution center in Shawnee, Kansas, is underway, slated to be operational by 2026.
Amid cost pressures, the company is implementing cost reduction and pricing strategies aimed at boosting profitability.
The financial outlook for the full year is cautiously optimistic, with predictions of flat to low single-digit sales growth and an adjusted EBITDA margin of 9% to 9.5%. The company's cash flow from operations was negative at $45.7 million, with capital expenditures rising to $5.7 million. Standard Motor Products borrowed $58.7 million on their credit facility and repurchased $2.6 million of shares.
InvestingPro Insights
In light of Standard Motor Products, Inc.'s (NYSE: SMP) recent announcement to acquire Nissens, investors may find the following insights from InvestingPro valuable for assessing the company's financial health and market position:
Standard Motor Products has demonstrated a commitment to shareholder returns, having raised its dividend for 3 consecutive years and maintained dividend payments for 15 consecutive years. This consistent return to shareholders is a positive sign, particularly when considering the company's current dividend yield of 4.42% as of mid-2024. Additionally, with liquid assets exceeding short-term obligations, SMP appears to be in a solid position to manage its short-term liabilities, which may instill further confidence in investors considering the upcoming acquisition.
From a valuation perspective, SMP trades with a P/E Ratio of 18.44, which has adjusted to a lower 9.07 on a last twelve months basis as of Q1 2024, indicating a potentially more attractive valuation. Moreover, the stock is trading near its 52-week low, which could suggest a buying opportunity for value investors, especially in the context of the company's expansion through strategic acquisitions.
While two analysts have revised their earnings downwards for the upcoming period, it's important to note that analysts predict the company will be profitable this year. SMP has been profitable over the last twelve months, which may offer some reassurance amidst concerns over earnings revisions.
Investors interested in a deeper analysis can access more InvestingPro Tips for Standard Motor Products, including insights into stock volatility and performance over the last six months. There are currently 9 additional tips available, which can be accessed through InvestingPro's platform. To enrich your investment decision-making process, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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