Bankers rev up interest for Bapcor

Auto parts supplier Bapcor is considered vulnerable to due management disruptions and a poor financial performance.

Investment bankers are likely to be burning up the tarmac of Sydney airport in the coming days as the United States becomes the destination for their search for a rival Bapcor suitor.

DataRoom understands that the bankers at Bapcor’s defence adviser, Macquarie Capital, are targeting major car parts rivals in the US to see whether they are prepared to take the auto parts business for a test drive and have been speaking to groups from that part of the world.

The trouble is, a number of them, including AutoZone, have looked at the $1.7bn Bapcor before and passed on the opportunity.

Still, there’s a growing view that Bain Capital’s interest in the business is real, but it’s very early days, as UBS and Morgan Stanley aid its Bapcor buying efforts.

The buyout fund which often targets companies in distress (think Virgin Australia, Accolade Wines) is bidding for Bapcor at its most vulnerable time; it doesn’t have a chief executive (appointed replacement Paul Dumbrell recently pulled out of taking the job) and its chairman, Margaret Haseltine, is departing.

One view is that Bain could walk away if it gets a chance to look under the hood of Bapcor.

Still, it followed through on its purchase of aged-care provider Estia after due diligence, and Virgin Australia which it purchased out of voluntary administration.

DataRoom understands that its game plan is to buy the business and fix it up, putting in the right management, then selling it off to a US rival or listing it when it has righted the ship.

There are big synergies for a major operator out of the US, but they need Bapcor to have strong leadership because Australia is too far away to be consistently sending down its executives from the US to keep an eye on things.

The question, though, is whether it’s too late, as it expects $93m to $97m in net profit this financial year.

So far, the thinking is that investors (Bapcor counts Perpetual, AustralianSuper and John Wylie’s Tanarra as shareholders) just want out as its systems are understood to be in a mess after multiple profit downgrades, multiple management changes and a 25 per cent share price fall in the past year.

Other suitors which have looked at it since the departure of boss Darryl Abotomey in 2021 have a similar opinion.

It all just depends on how bad Bain considers things to be when it carries out due diligence – if in fact it gets the chance.

The $5.40-per-share offer Bain lobbed on June 7 after its shares earlier closed at $4.36 is considered low ball.

But investors have had enough.

Meanwhile, larger market rival Repco continues to go from strength to strength in the weak economic environment when aftermarket auto part sellers should be thriving.