Good news for prominent South African company in business rescue

The Competition Commission has given Metair’s acquisition of AutoZone the green light but stipulated that no employees may be retrenched for three years as a result of the merger.

Automotive parts retailer and wholesaler AutoZone entered business rescue proceedings in July this year after landing in financial trouble

AutoZone is the largest privately owned automotive parts retailer and wholesaler in Southern Africa with a presence in South Africa, Namibia, Swaziland, and Botswana

The company has 214 wholly-owned retail branches and 33 member-owned franchise branches.

AutoZone published a notice on 5 July 2024 that its board of directors adopted a resolution on 1 July 2024 to voluntarily commence business rescue proceedings.

When announcing that it had entered into business rescue proceedings, AutoZone said it was confident the company could recover, given its strong national brand and branded products in South Africa.

AutoZone CEO Dion de Graaff said the business rescue process will afford its practitioners the “breathing space” they need to explore all possible outcomes for the company.

At the time, De Graaff said three third parties had expressed interest in investing in AutoZone and that the company had reportedly received several offers from potential bidders seeking to acquire it.

These reports led the business rescue practitioners to request a deadline extension for the publication of the business rescue plan, which was granted, and AutoZone’s business rescue plan was published in September 2024.

However, on 4 October, it was announced that MetAir would be acquiring AutoZone in a R290 million deal.

In its announcement, Metair noted that a key driver of AutoZone’s historical trading performance has been the impact of the significant debt on its balance sheet, predominantly related to the 2014 leveraged buyout of the business. 

“This funding structure impacted AutoZone’s ability to invest in working capital sustainably, ultimately impacting historical profitability,” Metair said.

“All of AutoZone’s historical debt will be settled following implementation of the Business Rescue Plan.”

“Metair is of the view that following the restructuring of AutoZone in terms of the Business Rescue Plan and investment in working capital, the business can return to profitability and be value accretive for Metair.”

Now, this deal has received approval from South Africa’s competition watchdog, with the commission recommending that the Competition Tribunal approves the proposed transaction.

Specifically, Nikisize – a subsidiary of Inalex, which is a subsidiary of Metair – intends to acquire AutoZone.

Metair is a public company listed on the JSE and is involved in the manufacture of aftermarket automotive components and components for original equipment manufacturers through various local subsidiaries. 

These components include batteries, brake components, cooling systems, suspension components, and electrical components.

The Metair Group supplies automotive components to vehicle manufacturers, vehicle dealerships and automotive aftermarket parts wholesalers.

AutoZone is comprised of 169 automotive aftermarket parts retail outlets and six wholesalers of automotive aftermarket parts. 

The company is a wholesaler and retailer of a wide range of aftermarket automotive parts, spares and car accessories, including but not limited to batteries, brake components, shocks, gaskets, gearboxes, engine parts, oil pumps, and other heavy-duty parts catering for passenger and light commercial vehicles.

To address supply concerns, Metair has agreed to conditions that will ensure AutoZone’s competitors continue to be supplied with Metair’s automotive aftermarket parts post-merger. 

The merging parties have also agreed to conditions that will ensure their respective competitors’ sensitive information will not be used to dampen competition. 

“The Commission is of the view that the proposed conditions address any concerns that may arise,” the commission said.

The commission also added a condition to its approval to address public interest concerns.

It stipulated that the two parties may not retrench any AutoZone employees as a result of the merger for 36 months from the merger approval date.