Keystone Automotive to Buy Tenn. Parts Firm

Revving up its expansion engine, Keystone Automotive Industries said Wednesday that it will acquire Republic Automotive Parts for $63 million in stock.

The purchase would be the 13th such deal by the Pomona-based auto parts distributor since it went public in June 1996. Keystone has boosted its distribution and customer base by buying chains in the East, Midwest, Southeast and Texas.

“The collision repair industry is fragmented,” said John Olinksi, an analyst for Wedbush Morgan Securities in Los Angeles. “It’s ripe for consolidation.”

Keystone has nearly a quarter of the $1-billion “aftermarket” segment of the $10-billion collision repair industry. The company distributes recycled auto parts, paint, glass and other products to professional mechanics and repair shops.

“The industry is becoming more complicated, with electronic databases and insurance claims,” said Keystone Chief Financial Officer John Palumbo. “Mom-and-pop businesses that opened 25 years ago are looking for an exit strategy. They’re coming to us.”

He said Keystone will begin to slow its acquisitions pace this year but that it still intends to tap into the Pacific Northwest and California.

For its latest quarter ended Dec. 26, Keystone reported an 85% increase in net income, with earnings of $3.2 million, or 25 cents per share on a diluted basis, compared with $1.7 million, or 17 cents, for the year-earlier quarter.

Keystone stock has raced ahead since its initial public offering price of $9. It closed at $21.56 in Nasdaq trading Wednesday, up 94 cents.

Republic, based in Brentwood, Tenn., operates 15 parts distribution centers and 95 auto parts stores in 16 states. Its shares jumped $2.84 to close at $16.38, also on Nasdaq.

Keystone would issue 2.9 million shares of common stock, swapping 0.8 share for each share of Republic stock. The deal requires shareholder approval.