Car Parts Maker Gets While the Going is GUD

Car parts maker GUD Holdings (ASX: GUD) will double its size (and hopefully its market value of $1.1 billion) with a $745 million in cash and share deal to purchase AutoPacific Group (APG) from a private equity group.

GUD revealed the deal after putting its shares into a trading halt ahead of raising $405 million in cash from big shareholders.

The equity raising will consist of $120 million offered to institutional shareholders and a 1-for-3.45 GUD shares held pro-rata entitlement worth $285 million tomorrow.

All new shares will be offered at a 13.5% discount to Monday’s closing price of $12.03.

The company also released an upbeat trading update (no doubt with the same bullish commentary that the big investors were told in the sales performance for the fund raising).

In it GUD confirmed that its previous strong revenue momentum has continued into October, and it still expects full-year earnings of between $112 million and $116 million.

“Full year 2021-22 (to October 31) organic Automotive revenue and organic earnings before interest (EBIT) (ex JobKeeper) (was) up modestly after cycling a strong prior corresponding period,” GUD said. Margins were also trending higher than the first half of 2020-21.

GUD was also carrying higher inventories “to support growth and respond to elongated supply chains”, and forecast that its second half would be stronger than the first half.

AutoPacific manufactures car accessories like roof racks and tow-bars (a rival to the listed ARB) and GUD expects APG to make a positive contribution to group earnings next year.

GUD said that APG is forecast to report EBITDA (earnings before interest tax depreciation and amortisation) of $80 to $84 million for calendar 2022.

On top of the $405 million raising, GUD will give the AutoPacific’s vendors Pacific Equity Partners $75 million worth of new GUD shares or a 4.6% stake in the company, and borrow $282 million in debt.

“GUD’s acquisition of APG will see the Group make a meaningful step towards its vision of becoming an integrated leader in 4WD accessories and trailering (sic) in Australia and New Zealand with future export potential,” the company said in Tuesday’s statement to the ASX.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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