If it concludes as announced a month ago, the sale of the Quebec auto parts distribution company Uni-Select to its American competitor LKQ would bring in nearly 82 million Canadian dollars in share buybacks and various bonuses among its most senior executives and members of its board of directors.
Uni-Select Executive Chairman and Chief Executive Officer Brian McManus, hired two years ago, alone would collect $31.3 million in securities buybacks (stocks, options, DSUs, etc.), in various bonuses related to the conclusion of the transaction, as well as severance pay already agreed with LKQ after the period of Uni-Select subsidiary.
As for the chief financial officer of Uni-Select, Anthony Pagano, also hired two years ago and the main initiator of a resumption of discussions with LKQ (which had stalled in 2019), the conclusion of the transaction would bring him the equivalent of 20.6 million in share buybacks, various bonuses and severance pay.
Furthermore, if approved by a sufficient number of shareholders at their next extraordinary meeting, the acquisition of Uni-Select for 2.8 billion – C$48 in cash per share – by LKQ would yield 9.8 million in redemption of securities (shares, DSUs) from members of the Board of Directors who are not senior executives of the company, and who have all already declared themselves in favor of the transaction negotiated with LKQ.
This behind-the-scenes information on the Uni-Select sale agreement to LKQ, the announcement of which a month ago surprised the Quebec business community, and even the Caisse de depot et placement as a shareholder significant at 9.75%, are taken from the “Management Proxy Circular” which is being distributed these days to shareholders of the Boucherville-based company.
This is the main preparatory document for the holding of the extraordinary meeting of next Thursday, April 27, in virtual mode only, during which at least two-thirds (66%) of the votes cast by Uni-Select shareholders must prove favorable to the announced transaction.
For the time being, in addition to the full support of the members of the board of directors, including Martin Garant, who is senior investment manager in Quebec at the Caisse de dépôt et placement, the senior executives of Uni-Select and their vis-à -vis at LKQ indicate that they have the support of significant shareholders who count for at least 20% of the eligible votes.
Meanwhile, in the proxy circular, the members of the Uni-Select board of directors justify their support for the transaction negotiated with LKQ on its value of $48 per share very favorable to shareholders compared to its recent stock quote.
They also claim a purchase price per LKQ that represents a “favorable multiple” over recent comparable transactions.
Finally, the directors of Uni-Select claim that the company had to deal with a “limited number of potential buyers” and other “strategic options that would be reasonably possible” compared to the “certainty of value” of the transaction. negotiated with LKQ.
From its head office in Boucherville, Uni-Select manages a network of 15 distribution centers and 400 branches located in Canada, the United States and the United Kingdom. It employs some 5,200 people.
In its 2022 fiscal year, Uni-Select achieved revenue up 7.1% to US$1.73 billion. Operating profit of US$159.6 million grew 73% year-on-year, propelling net profit a significant rebound to US65 million, well ahead of the anemic US$895,000 that had was counted a year earlier.
For its part, Uni-Select’s announced future owner, Chicago-based LKQ Group, describes itself as “a global supplier of aftermarket and specialty parts used to repair and accessorize automobiles.” LKQ has business in North America, Europe and Taiwan.
In 2022, LKQ had revenue of US$12.79 billion, with net profit of US$1.15 billion. With its shares listed on the NASDAQ market, LKQ’s market capitalization is equivalent to US$15 billion.
Despite this difference in size between Uni-Select and LKQ, of the order of seven to one depending on income, it appears that the Chicago company intends to maintain the activities of Uni-Select’s head office in Boucherville. .
