When Brian McManus took over the management of the Uni-Select group in May 2021, it was neither his intention nor his mandate to one day put the automotive products distribution company active in Canada, the United States, up for sale. United and Great Britain. “We had to solve our operational problems, put our house in order and look at acquisition opportunities. LKQ’s offer came as a surprise, it’s the first time I’ve seen such a situation”, explains the CEO of Uni-Select.
The takeover bid filed last week by the American company LKQ on Uni-Select – which values the Boucherville group at 2.8 billion – came as the Quebec distributor is in full recovery.
Three years ago, recalls Brian McManus, the value of the action of Uni-Select had fallen to 3 $, the group experienced problems of profitability and displayed worrying debt ratios.
“The company experienced a crisis in 2018-2019 when strategic decisions that had been made did not yield the expected results. Uni-Select then tried to sell some of its divisions to reduce its debt and even studied the possibility of selling the whole company, but there was no interest”, underlines the CEO.
A year later, in May 2021, Brian McManus was recruited to bring some order to Uni-Select. After a flawless 18-year career at pressure-treated wood products maker Stella-Jones that grew sales from $80 million to $2 billion, Brian McManus accepted the challenge.
“With the chief financial officer, Anthony Pagano, we undertook to reduce the debt. We changed the management team, making internal and external appointments, and emphasizing three fundamental values: belonging, teamwork and respect,” summarizes the CEO.
Brian McManus then set five priorities for each of the group’s three divisions.
It was about simple things, we weren’t aiming for the home run, but to achieve simple things, one after the other.
Brian McManus
The results were quick. After posting a meager net profit of US$895,000 in 2021, Uni-Select rebounded by producing a net profit of 65 million in its last fiscal year.
“We were also favored by market conditions. We were coming out of COVID, the used car market was booming and inflation helped us as we were able to keep our costs at good levels,” says the CEO.
Three years ago, the debt/EBITDA ratio was 4, and last year it fell back to 1.3. The value of the stock, which had risen to $15 in May 2021, crossed the $40 mark, before the offer of the American company LKQ which took the stock to more than $46 last week.
Council recommends offer
It is in this context of recovery that the American group LKQ, also active in the distribution of spare parts for automobiles with activities in the United States, Europe and Asia, made its offer to pay $48 shares of Uni-Select, an offer that was unanimously accepted by the board of directors of the Quebec group.
“LKQ is seven times bigger than us. They have a very strong balance sheet and a good market capitalization of almost 16 billion US. This will allow us to compete with groups of the same size like NAPA, which is ten times bigger than us.
“Our activities are complementary to theirs. They will be able to penetrate the Canadian market and that is why they will keep the head office in Boucherville. However, they will have to sell our activities in Great Britain because they have a strong presence in Europe”, explains Brian McManus.
Did the management of Uni-Select seek to conclude an alternative transaction to prevent the Quebec group from being absorbed?
We hired TD to study the market, but we couldn’t find any alternatives. Of course, we had a growth plan, but there was no guarantee that it would happen. The Board of Directors deemed the LKQ offer to be the best option for all stakeholders, employees, shareholders and suppliers.
Brian McManus
During his 18-year stint at Stella-Jones, Brian McManus made more than 20 acquisitions. How does he experience this turnaround?
“It sure leaves a bittersweet taste. I’m proud that we succeeded in our turnaround so quickly, I’m proud of the team that made this turnaround, but we woke up a buyer’s appetite.
“I think in the context, it’s the best thing that can happen. We are in a much better position than we were in 2019 and the future of the group is more solid”, he underlines.
Brian McManus confirms that he met with the president of the Caisse de depot, Charles Emond, last week. The Caisse holds 9.5% of the shares of Uni-Select, but is not the preponderant shareholder. Two Toronto funds, Birch Hill and Edge Point, have positions over 10%.
“Mr. Emond asked me the same questions as you. He wanted to know why we were selling. The Caisse de dépôt does not have a seat on the Board of Directors. Martin Garant, who works at the Caisse de depot, is an independent director at Uni-Select,” says Brian McManus.
Could a new offer from another group arise in the coming weeks, according to him?
” I don’t know. Our advisors have reviewed the market and are of the opinion that LKQ’s offer was the most suitable for us, in particular because of the complementarity of our activities,” says Brian McManus.