| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 22, 2024, Advance Auto Parts, Inc., a Delaware Corporation (the “Company”) and an affiliate of the Carlyle Group (the “Buyer”) entered into a Sale and Purchase Agreement (the “Agreement”) to sell the Company’s Worldpac business (“Worldpac”).
Pursuant to the Agreement and upon the terms and subject to the conditions set forth therein, the Company has agreed to sell to the Buyer, and the Buyer has agreed to acquire from the Company, Worldpac, for a purchase price of $1.5 billion in cash, with customary adjustments for working capital and other items (the “Transaction”). The Transaction is expected to close in the fourth quarter of 2024.
The Company expects net proceeds from the Transaction after taxes and expenses to be approximately $1.2 billion. The Company intends to use net proceeds from the Transaction for general corporate purposes, which may include the provision of additional working capital, funding internal operational improvement initiatives and repayment or refinancing of outstanding indebtedness.
The Agreement contains representations, warranties and covenants that are customary for a transaction of this type, including, among others, covenants by the Company to operate the Worldpac business in all material respects in the ordinary course of business consistent with past practice during the period between execution of the Agreement and closing of the Transaction (“Closing”) and mutual employee non-solicitation for a period of two years following Closing, subject to the exceptions set forth in the Agreement.
The Transaction is subject to the satisfaction of customary closing conditions, including the expiration or termination of the waiting period under U.S. and Canadian antitrust laws; the absence of any governmental order enjoining or otherwise prohibiting the Transaction; the accuracy of certain representations and warranties of each party; the compliance of each party with its covenants in all material respects; and the absence of a material adverse effect with respect to the Worldpac business.
In addition, it is a condition of the Buyer’s obligation to close the Transaction that a new 364-day $400 million supply chain financing program for Worldpac be in place at Closing to replace the existing supply chain financing program of the Company utilized by Worldpac, and Worldpac suppliers representing at least 60% of Worldpac’s current suppliers shall have signed documentation to participate in the new program. The Buyer agreed to use reasonable best efforts to establish the new supply chain financing program, and the Company has agreed to use reasonable best efforts to cooperate with Buyer to support the program. Subject to the receipt of a guaranty from Worldpac, the Company has agreed to provide a letter of credit of up to $200 million for up to 12 months after Closing as credit support, which letter of credit will reduce to zero no later than 24 months after Closing.
The Agreement contains customary termination rights, including if Closing has not occurred on or prior to January 30, 2025 (the “Termination Date”), subject to certain limitations. The Buyer will also be required to pay or cause to be paid to the Company a termination fee of $90 million if the Agreement is validly terminated by the Company in the event of a breach or failure to close by the Buyer.
The above summary of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement which is filed as Exhibit 10.1 hereto and incorporated herein by reference. The Agreement is being filed to provide information regarding its terms. It is not intended to provide any other factual information about the Company, Worldpac or the Buyer. The representations, warranties and covenants contained in the Agreement were made solely for purposes of the agreement and as of specific dates, were solely for the benefit of the parties to the Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
