Bapcor Ltd (ASX: BAP) shares are driving higher after announcing an Asian acquisition to expand its presence in the region.
What is Bapcor buying?
Bapcor, Australia’s leading auto parts business, announced that it’s going to expand in Asia with the acquisition of 25% of Tye Soon Limited, which is a company that’s listed on the Singapore Securities Exchange.
What is Tye Soon?
Tye Soon is a business that has S$200 million of annual revenue. It generates S$43 million from 15 locations in Malaysia, S$43 million from 20 locations in South Korea, S$42 million from 20 locations from Australia, S$19 million from two locations in Singapore, S$13 million from one location in Thailand and another S$40 million from other locations. Essentially, it’s spread right across the region.
It was established in 1933 and was described as the “most prominent” independent automotive parts distributor in South East and North East Asia, distributing a wide range of genuine parts and aftermarket parts.
Tye Soon has one of the largest portfolios of top tier global brands of auto parts, partnering with suppliers from Europe, Japan and South Korea.
What is the investment going to cost Bapcor?
Bapcor is going to invest S$12.5 million for the 25% stake in Ty Soon. The deal is expected to complete in April 2021 and it will soon nominate directors for the Tye Soon board.
Leadership comments
The Bapcop Managing Director and CEO Darryl Abotomey said: “The complementary expertise of Tye Soon and Bapcor brings a range of opportunities for both businesses to collaborate and grow their markets. Tye Soon has particular strengths in genuine parts and aftermarket parts distribution as well as an excellent store network in fast growing South East and North East Asian countries. Bapcor will work with Tye Soon to maximise the opportunities to grow their businesses in Asia and Australasia.”
My thoughts on Bapcor’s acquisition and the share price
The Bapcor share price has gone up around 1% in early reaction to this. It will be interesting to see if Bapcor looks to grow its holding of Tye Soon over time. I think it makes a lot of sense to grow in Asia – it’s a huge addressable market.
I actually think the Bapcor share price is very reasonably priced considering how much profit growth it’s generating in FY21. If it can capitalise on the Asian opportunity then it could become a much bigger company. It’s also doing well at expanding its networks in Australia, whilst growing same store sales and margins.
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