Bain's Offer to Buyout Bapcor Seen as 'Reset' for Company

You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from new insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: 33 percent of PE-backed technology buyouts last year have already replaced their CEOs, according to analysis by Value Add. Excluding tech companies, only 11% of PE-backed CEOs have been replaced over the same time period, which is on par with CEO turnover in publicly-traded companies. The data suggests that management changes are still very much a value creation tactic used by PE firms but not as broadly across industries as one might expect. (Read More)

More Insights

• Europe Private Equity Report 2024 (Read)
• Consumer Sector Private Equity Report (Read)
• Private Equity Case Study: BJ’s Wholesale (Read)
• Energy Sector Private Equity Report (Read)
• CEO Turnover is Highest in PE-backed Tech Buyouts (Read)

Spotlight

What’s the deal? Bapcor, an Australian retailer specializing in automotive parts, has received a takeover bid from Bain Capital valued at AUD 1.83 billion (USD 1.2 billion). The offer, made at AUD 5.40 per share, represents a 23.9% premium over Bapcor's last closing price before the announcement. This proposal comes amidst challenging times for Bapcor, which has faced significant financial and management difficulties in recent years​​​​.

Financial Performance. In 2023, Bapcor reported revenues of AUD 763 million, a +11% increase year-over-year, and an EBITDA of AUD 124 million, marking a +7% rise. Despite these positive figures, the company's stock price has dropped -21% year-to-date due to a profit warning issued earlier this year. Bapcor forecasted a decline in its second-half profits for 2024, projecting a full-year result between AUD 93 million and AUD 97 million, down from AUD 103 million in 2023. This downturn is attributed to weak retail performance, competitive pricing pressures, and rising operational costs​​​​.

Recent Developments. Bapcor has been navigating a turbulent period marked by leadership instability and strategic missteps. The company's recent history includes the departure of CEO Noel Meehan in February 2024 and the subsequent withdrawal of Paul Dumbrell, who was set to replace him. Mark Bernhard, a non-executive director, has stepped in as interim CEO while a search for a permanent leader is underway. Additionally, board chair Margie Haseltine announced she would not seek re-election, further signaling instability at the top levels of management​​​​.

Market Positioning. Bapcor is a leading provider of automotive parts, accessories, and services in the Asia-Pacific region. It operates several well-known brands, including Autobarn, Burson, Autopro, and Midas, and has a network of over 1,100 stores. Despite its strong market presence, Bapcor has struggled to maintain its competitive edge due to rising competition from rivals like Super Retail Group and the pressures of a declining retail environment​​ due to high interest rates and credit card debt which is putting pressure on consumer spending.

Strategic Implications. Bain Capital's bid is seen as an opportunity to stabilize Bapcor and potentially unlock value through strategic improvements. Analysts believe the private equity firm's involvement could bring much-needed operational expertise and capital to revitalize the company. However, some major investors, including Burson co-founder Garry Johnson, argue that the offer undervalues Bapcor given its potential if managed effectively. This sentiment reflects a broader skepticism about whether Bain's offer represents the best outcome for shareholders​​​​.

The takeover bid from Bain Capital presents a critical juncture for Bapcor. While the proposal offers immediate financial relief and a premium over current share prices, it also raises questions about the future direction and management of the company. Shareholders and analysts alike will be closely watching the developments, weighing the potential benefits of private equity ownership against the inherent value of Bapcor’s market position and growth prospects under improved leadership.

Buyout News 

KKR is raising $20 billion for a new North America private equity fund. KKR reported a net IRR of 20.5% from its 2017 North America fund, which is slightly higher than Bain Capital’s 2018 fund and nearly double the return of Carlyle’s 2017 fund. (Source)

Meanwhile, H.I.G. Capital raised $1.3 billion for a new fund dedicated to middle-market infrastructure buyouts. The fund is placing a particular emphasis on businesses that help local governments with challenges related to waste removal and traffic congestion. (Source)

Famed venture capital firm Andreessen Horowitz is launching a private equity fund to invest in mature companies. Not much has been said about the fund’s strategy, but given how active established PE firms have been investing in the tech sector over the past five years, Andreessen Horowitz is probably looking to tap its industry connections to invest in companies that have graduated beyond the startup phase. (Source)

Carlyle Group is funding a new oil and gas company that will be run by former BP CEO Tony Hayward. The company is wasting no time with M&A, acquiring Energean’s assets in Egypt, Italy, and Croatia, worth $945 million. (Source)

Portco News

KPS Capital Partners has sold packaging business Eviosys for $4 billion to Sonoco Products, which manufactures cans such as those used by Pringles. KPS paid $2.7 billion for the business in 2021, marking one of the first exits from a PE deal that year. (Source)

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