Carlyle Group to acquire Worldpac from Advance Auto Parts for $1.5 billion

Carlyle Group Inc. is set to make a significant move in the automotive industry with its $1.5 billion acquisition of Worldpac from Advance Auto Parts Inc. 

This deal represents Carlyle’s first major industrial investment in over two years, underscoring its strategic focus on the automotive sector’s resilience.

Worldpac, a prominent wholesale distributor of original equipment replacement parts, generated $2.1 billion in revenue for the year ending June 30, 2024. 

The acquisition aligns with Carlyle’s strategy of investing in sectors that demonstrate enduring demand, particularly as vehicles age and become more complex.

Why is Advance Auto Parts selling Worldpac?

The decision to sell Worldpac comes amid mounting pressure on Advance Auto Parts from shareholder activists seeking improved financial performance. 

The company, based in Raleigh, North Carolina, has struggled to compete with rivals like AutoZone Inc. and O’Reilly Automotive Inc. 

Following the announcement, Advance Auto Parts’ shares plummeted by up to 14% in premarket trading, continuing a year-long decline that has seen its stock value drop to about a quarter of its 2021 peak. 

This sale is part of Advance Auto’s strategy to streamline operations and enhance shareholder returns by focusing on its core business.

What this deal means for the automotive sector

For Carlyle, the Worldpac acquisition fits into its broader investment strategy of targeting resilient industries. 

According to Martin Sumner, Carlyle’s head of global industrial & transportation, the automotive parts industry’s stability is driven by the aging and expanding existing car park, rather than new car production.

Carlyle has a track record of successful industrial carve-outs, having invested approximately $13 billion in this sector over the past 20 years.

Notable recent investments include companies such as Nouryon, Axalta, Atotech, Signode, and Allison Transmission.

The acquisition of Worldpac signals Carlyle’s confidence in the long-term prospects of the automotive parts market.

This deal is particularly timely given that Advance Auto Parts has adjusted its financial outlook for the year, now projecting a flat to a 1% decline in comparable store sales. This revision highlights the ongoing challenges faced by the company in regaining market share and improving financial health.

Shane O’Kelly, President and CEO of Advance Auto Parts, noted that the company’s strategic focus will now shift towards optimizing its remaining operations to deliver stronger returns for shareholders.

The emphasis will be on enhancing sales trajectories and maximizing the efficiency of existing assets.

Carlyle’s acquisition of Worldpac is part of a broader strategy involving industrial carve-outs and investments in sectors with robust growth potential.

The firm’s recent $3.8 billion acquisition of Baxter International Inc.’s kidney care business further demonstrates its commitment to sectors with strong stability and growth prospects.

By adding Worldpac to its portfolio, Carlyle enhances its presence in the automotive sector, positioning itself for future growth in an industry characterized by evolving vehicle needs and long-term demand for replacement parts.