Unitas patches up Australian auto parts firm

"When you look at the business, a mechanic has a customer with a car on a hoist and they need the replacement part as soon as possible," explains John Lewis, the private equity firm's CEO. "The mechanic calls several suppliers and if you don't have the part he will call someone else next time. So we invested about $80 million to increase the range of parts available, driving a resurgence in the trade business."

Unitas acquired the business in 2006 for an enterprise valuation of around A$570 million (then $460 million), seeing the potential for a turnaround. Exego had gone public three years earlier but was struggling, a strong brand underpinned by operational and financial disarray that came after the previous CEO and management cashed out in through the IPO.

Last week it completed its exit from the company as Genuine Parts bought the remaining 70% for $800 million, including debt. The US-based firm took a 30% stake in Exego for $150 million last January with an understanding that it would complete a buyout once its target reached certain earnings thresholds. According to sources familiar with the transaction, Unitas has gained $440 million on an initial investment of $192 million for a 3.3x return.

"We reached the threshold at least one year ahead of what we had expected," Lewis explains. "Genuine Parts was willing to pay a higher multiple of a higher underlying level of profits, once they had been in the business for a while. For us, it was a significantly better gain than if we had sold the whole company at the beginning. For them, it was a low-risk approach."

Unitas claims that Exego's EBITDA has more than doubled during its ownership period with annual revenues topping $1 billion, driven by a revitalized Repco retail business as well as trade sales to mechanics. Exego's other interests - lighting brand Ashdown-Ingram, motorcycle-wear manufacturer McLeod Accessories, and engine services provider Motospecs - also contributed to bottom-line growth.

The alterations made to Exego's operations were implemented by a new CEO, John Muller, who built a strong management team around him, including CFO I.S. Lim, who performed the same role at another Unitas portfolio company, South Korean retailer Buy The Way. The Exego board was also augmented by individuals with relevant experience, such John Adams, former CEO of AutoZone, a US auto parts success story.

"He offered strategic guidance and a network of contacts that proved invaluable in introducing best practices as well as identifying potential buyers for the business when it came time to exit," Lewis says.

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• Topics
• Buyouts
• Exits
• Australasia
• Industrials
• Unitas Capital
• Growth capital
• Australia