Filer: Advance Holding Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange act of 1934.
Subject Company: Discount Auto Parts, Inc.
Commission File No. 1-11276
Advance Auto Parts to Acquire Discount Auto Parts
Roanoke, Va. and Lakeland, Fl. - August 7, 2001 - Advance Auto Parts and
Discount Auto Parts, Inc. (NYSE: DAP) announced today that they have signed a
definitive agreement for Advance to acquire Discount in a merger transaction.
As a result of the merger, Discount shareholders will own approximately 13%
(approximately 4.3 million shares) of the total shares outstanding of the
combined company. Discount shareholders will receive $7.50 in cash plus 0.2577
shares of common stock of the combined company for each Discount share. Advance
Holding Corporation will file a registration statement with the SEC covering the
shares to be issued in the transaction and will become a public company and
renamed Advance Auto Parts, Inc. Larry Castellani will remain as Chief Executive
Officer of Advance. Peter Fontaine, Chairman and Chief Executive Officer of
Discount, will become a member of the Board of Directors of Advance.
Advance and Discount combined today operate 2,420 stores in 38 states. On a pro
forma trailing twelve month basis, the combined companies generated over $3.0
billion in revenues and approximately $243 million in EBITDA. Management
believes that significant benefits will be obtained through purchasing and
distribution efficiencies and other expense savings. Such efficiencies could
total $30 million on an annual basis. At closing, total debt (net of cash) is
estimated to be approximately $950 million and total diluted Advance shares
outstanding will be 33.8 million.
"Discount Auto Parts provides Advance with a solid position in the Southeast, a
leading presence in the important state of Florida, and an emerging, sound
commercial delivery operation," said Larry Castellani, CEO of Advance. "With
Discount's strong team and a customer service orientation similar to our own, we
believe the combined company will be an even stronger competitor in our
industry."
"We liked the fit with Advance from the start," said Peter Fontaine, Discount
Auto Parts Chairman. "Advance offered us an opportunity to merge with a company
that was very similar to ours, from its roots in family ownership and its
culture, to its store format and customer demographic. We believe the merger is
a great fit and a solid win for us all: our shareholders, our team and our
customers."
Based on the above referenced pro forma financial information including expected
efficiencies, the stock component of the transaction will have an implied value
of $7.50 - $9.50 per existing Discount share when applying a latest twelve
months EBITDA multiple of 7x-8x. This multiple range is at the low end of the
current multiple range for comparable auto parts retailers, including AutoZone,
Genuine Parts, O'Reilly
Automotive and Pep Boys. When the $7.50 per share cash component is included,
the total implied value of the transaction will be an estimated range of
$15.00 - $17.00 per existing Discount share. No assurances can be given
regarding the price of Advance's stock following the close of the transaction.
As part of the transaction, holders of outstanding options to purchase common
stock of Discount will receive, in exchange for their Discount options, either
cash payments (for those options with an exercise price under $15.00 per share)
or options to purchase the common stock of Advance Auto Parts, Inc. (for those
options with an exercise price at $15.00 or more).
Fontaine Industries Limited Partnership, a partnership controlled by Peter
Fontaine, is Discount's largest shareholder and has entered into a voting
agreement requiring Fontaine Industries to vote its shares in favor of the
transaction and has granted an irrevocable proxy to Advance Stores Company to
vote such shares. In addition, Fontaine Industries has entered into a stock
option agreement granting an option to Advance Stores Company to purchase the
shares held by Fontaine Industries under certain circumstances. Fontaine
Industries owns approximately 25% of the outstanding common stock of Discount.
In connection with the merger agreement, Discount's Board of Directors approved
an amendment to its Stockholder Rights Agreement to make the provisions of the
Stockholder Rights Agreement inapplicable to the transactions contemplated by
the merger agreement.
The transaction is subject to approval by the shareholders of Discount,
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
other customary closing conditions, and is expected to close in the fourth
calendar quarter of 2001.
Advance and Discount will hold a conference call on August 8, 2001 at 9:00 am
EST to discuss this transaction. For access to the conference call, please dial
(800) 374-1487 for domestic listeners or 706-679-3987 for international
listeners by 8:55 am EST on the date of the call, and ask for reference number
1552692. If you are unable to participate on the conference call, a replay of
the conference call will be available from August 8, 2001 to August 15, 2001. To
access the recorded conference call, interested parties should call (800) 642-
1687 for domestic listeners or (706) 645-9291 for international listeners and
reference reservation number 1552691.
The conference call and related presentation will also be webcast over the
Internet at www.discountautoparts.net or www.streetevents.com. The presentation
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will also be available at www.advanceautoparts.com
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JPMorgan acted as the sole financial advisor on the transaction to Advance and
will lead the financing along with Credit Suisse First Boston and Lehman
Brothers Inc. Salomon Smith Barney Inc. acted as exclusive advisor to Discount.
Advance Auto Parts is the primary trade name for Advance Stores Company,
Incorporated, a wholly owned subsidiary of Advance Holding Corporation. Advance
ended the second quarter of 2001 with 1,765 stores in 38 states, primarily
located in the eastern and mid-western regions of the United States and in
Puerto Rico and the Virgin Islands. The company is based in Roanoke, Va., and
is the second largest auto parts chain in the nation. Additional information
about the company, employment opportunities, services, as well as on-line
purchase of parts and accessories can be found on the company web site at
www.advanceautoparts.com.
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Discount Auto Parts, Inc. is one of the Southeast's leading specialty retailers
and suppliers of automotive replacement parts, maintenance items and accessories
to both DIY consumers and professional mechanics and service technicians. The
Company currently operates stores located throughout Florida, Georgia,
Mississippi, Alabama, Louisiana and South Carolina.
Forward Looking Information
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The forward-looking
statements include, but are not limited to: (1) statements about the benefits
of the merger between Advance and Discount Auto Parts, including future
financial and operating results, purchasing efficiencies, distribution
efficiencies and other cost savings; (2) statements with respect to Advance's
and Discount's plans, objectives, expectations and intentions and other
statements that are not historical facts; and (3) other statements identified by
words such as "believes", "expects", "anticipates", "estimates", "intends",
"plans", "targets", "projects" and similar expressions. As used herein, Advance
shall be deemed to mean Advance Holding Corporation and its wholly-owned
subsidiaries Advance Auto Parts, Inc. and Advance Stores Company, Incorporated.
These statements are based upon current beliefs and expectations of the
managements of Advance and Discount Auto Parts, and are subject to significant
risks and uncertainties. Actual results may differ materially from those set
forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: (1) the risk
that the businesses of Advance and Discount Auto Parts will not be integrated
successfully or such integration may be more difficult, time-consuming or costly
than expected; (2) expected efficiencies and cost savings from the merger may
not be fully realized or realized within the expected time frame; (3) revenues
following the merger may be lower than expected; (4) operating costs, customer
loss and business disruption following the merger, including, without
limitation, difficulties in maintaining relationships with suppliers and
employees, may be greater than expected; (5) inability to obtain or meet
conditions imposed for governmental approval for the merger or merger schedule;
(6) the failure of Discount Auto Parts' shareholders to approve the merger; (7)
recessionary trends in general or in specific areas where Advance and Discount
Auto Parts operate; (8) competitive pricing and other competitive pressures; and
(9) other economic, business, competitive and/or regulatory factors affecting
Advance's and Discount Auto Parts' businesses generally.
More detailed information about some of these factors is set forth in Advance's
and Discount Auto Parts' filings with the SEC, including Advance's annual report
on Form 10-K for the fiscal year ended December 30, 2000 and Discount Auto
Parts' annual report on Form 10-K for the fiscal year ended May 30, 2000,
including Discount Auto Parts' 2000 annual report to shareholders attached
thereto. Advance and Discount Auto Parts are under no obligation to (and
expressly disclaim any such obligation to) update or alter their forward-looking
statements whether as a result of new information, further events or otherwise.
# # #
Investors and security holders are advised to read the proxy
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statement/prospectus regarding the business combination transaction referenced
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in the foregoing information, when it becomes available, and any other relevant
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documents filed with the SEC by Advance and Discount Auto Parts because the
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documents will contain important information. The proxy statement/prospectus
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will be filed with the SEC by Advance and Discount Auto Parts. Investors and
security holders may obtain a free copy of the proxy statement/prospectus (when
available) and any other document filed with the SEC by Advance or Discount Auto
Parts at the SEC's web site at www.sec.gov. The proxy statement/prospectus and
such other documents may also be obtained from Advance and Discount Auto Parts
by making a request to Advance Holding Corporation, 5673 Airport Road, Roanoke,
Virginia 24012, Attention: Corporate Secretary, Telephone: (540) 362-4911; or
Discount Auto Parts, Inc., 4900 Frontage Road South, Lakeland, Florida 33815,
Attention: Corporate Secretary, Telephone: (863) 687-9226.
Discount Auto Parts, Advance and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies of
Discount Auto Parts' shareholders to approve the business combination
transaction and adopt the agreement providing for the merger. The directors and
executive officers of Discount Auto Parts also may have an interest in the
transaction, including as a result of holding stock or options of Discount Auto
Parts. A detailed list of the names of Advance's directors and executive
officers is contained in Advance's annual report on Form 10-K, filed on March
30, 2001, and a detailed list of the names of Discount Auto Parts' directors and
executive officers and their ownership of stock and options of Discount Auto
Parts is contained in Discount Auto Parts' proxy statement, filed on August 31,
2000, for its 2000 annual meeting of shareholders, as updated by beneficial
ownership reports filed subsequent to such annual meeting. Such documents, and
the proxy statement/prospectus disclosing interests of the directors and
executive officers of Discount Auto Parts, when filed, may be obtained without
charge at the SEC's web site at www.sec.gov.