Auto Service World
News   March 4, 2019   by Adam Malik

Trico acquires Fram Group; analysts see risks in deal

Fram's filters and Autolite spark plugs brands included in deal reported to be worth US$310 million


Trico Group has acquired Fram Group.

The deal includes Fram filters and Autolite spark plugs brands. Fram was previously owned by Rank Group, which acquired Fram as part of a deal to buy the automotive consumer business of Honeywell International for US$950 million in 2011.

This follows a January acquisition of ASC Industries and Airtex Products for $75 million by Trico.

The deal has been in place since at least February. Financial analyst company Moody’s reported a month ago that a definitive agreement had been entered into for around US$310 million. The deal will be funded through loans that the agency finds risky because Trico is taking on “significant” debt and doesn’t see filters as a growth category.

“While the company is taking definitive steps to increase scale and diversify its portfolio with three acquisitions, doing so in a relatively short time frame is credit negative because it exacerbates execution and integration risk,” said Moody’s analyst, Inna Bodeck. “In addition, Trico is funding the acquisition of FRAM with a significant amount of debt and acquiring a business whose product category is stable at best as the life cycle of oil filters continues to lengthen and persistent price pressure from a customer base with significant scale weakens margins.”

Jay Burkhart

AC Investments agreed, taking a negative outlook on the deal. It noted that S&P Global Ratings revised its outlook on Trico to negative from stable and commented that the risks from the deal, in addition to the ASC and Airtex acquisitions, would lead to weaker-than-expected credit metrics in the next year.

“Although we recognize the strategic motivations behind these acquisitions, we believe the magnitude of more than doubling its revenue presents opportunities for missteps. In addition, FRAM, Airtex, and ASC have all been experiencing declining revenues, and a weakening macroeconomic environment could result in unanticipated headwinds,” the company said.

That didn’t damper Trico’s happiness for the deal.

“We are excited to enhance our product portfolio with these two leading brands,” said Jay Burkhart, Trico president, according to aftermarketnews.com. “The filter category is a natural complement to our wiper products as our ‘maintenance’ offering, while Autolite adds to our ‘repair parts’ product line of fuel pumps, water pumps and lift supports.”

Trico did not respond to AutoServiceWorld’s request for comment.


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3 Comments » for Trico acquires Fram Group; analysts see risks in deal
  1. Richard moote says:

    No comment that gram and auto lite were part of bendix corp

  2. Lynn says:

    I believe the present management of Trico is living in the past. The declining market for Fram will bring financial loss to Trico. So many previous purchasers are no longer in the market as the OEMS are gaining more control of the parts sales. The days of the DIY auto maintenance is becoming minuscule at best. Technology now requires most maintenance/repairs be done at the OEM DEALERSHIPS. Aftermarket has been and will be reduced to a very small part of the marketplace.

    Lynn

  3. William Whatley says:

    YOUR commentators seem to be losing it with respect to FRAM Filters. This company has been around for ages (probably came over with Columbus aboard the Santa Maria). As long as oil is used as a natural lubricant, there will continue to be the need for filters capable of trapping 20 micron dirt particles, and this is just what FRAM FILTERS are designed to do and these filters successfully achieve.

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