Bapcor drives away from Bain’s low ball offer

Auto parts spare parts car on the grey background. Set with many new items for shop or aftermarket. Auto parts for car. 3D rendering

Bain Capital is expected to be shown the door by Bapcor this week following its $1.8bn buyout proposal for the aftermarket auto parts company, unless it can come up with a higher offer.

But other Bapcor bidders are expected to be thin on the ground.

Defence adviser Macquarie Capital has been trying to drum up suitors from US-based strategic buyers.

But it is understood the two main industry participants, Missouri-based O’Reilly Auto Parts and Tennessee-based AutoZone, have passed.

Bain Capital’s $5.40-a-share offer on June 7 was considered low-ball, with shares trading at about $4.60 before the bid. But the balancing act for Macquarie Capital will be saying no to Bain Capital but keeping the Boston-based fund interested, urging a higher price, which would then gain it due diligence with the hope it would lift its offer again.

That could be a tall order, with suggestions the business has been on a bumpy ride, and could again downgrade earnings guidance.

Job cuts have also been in the works, with a number of corporate staff understood to have been let go last week.

Once Bain Capital looks under the bonnet, it may lose interest.

John Wylie’s Tanarra is a major investor and is understood to have the view that the board should not grant due diligence without a higher bid.

Bain Capital, advised by Morgan Stanley and UBS, often targets companies in distress, including Virgin Australia and Accolade Wines, and is bidding for Bapcor at its most vulnerable time; it doesn’t have a chief executive and its chairman, Margaret Haseltine, is departing.

DataRoom understands that its game plan is to buy the business and fix it up, then selling it off to a US rival or listing it.

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 own executives to keep an eye on things.

Bapcor expects $93m-$97m in net profit this financial year after issuing profit downgrades.