O’Reilly bids for Genuine Parts’ auto unit

The offer could change existing plans to spin off the unit.

Genuine Parts Co. shares climbed on Thursday after reports that O'Reilly Automotive has submitted a cash offer for the company's auto parts business, highlighting the value of the division as the industrial distributor weighs strategic alternatives.

While no agreement has been reached, O'Reilly's proposal could value the auto business at more than $10 billion, according to a Bloomberg report citing people close to the matter.

The offer is said to be one of several strategic options under consideration as Genuine Parts evaluates the future of the business.

The company could still proceed with a previously announced plan to separate its auto and industrial businesses into two standalone companies after facing pressure from activist investor Elliott Investment Management to simplify its corporate structure and improve returns. Rival bidders could also emerge.

The reported interest from O'Reilly suggests that strategic buyers also see significant value in the automotive unit, potentially validating those arguments.

For shareholders, the bid also provides an external benchmark for the value of Genuine Parts' largest business and may strengthen the investment case that the company's individual operations are worth more apart than together.

A formal offer from a strategic buyer also increases pressure on the board to demonstrate that whichever path it chooses delivers the greatest value to investors.

Attention now turns to Genuine Parts' board as it evaluates its strategic options.

Investors will be watching for signs of competing offers, further details on the company's separation plans, and any indication that an outright sale could deliver a higher return than a standalone spin-off.

Until then, the reported bid has established a new reference point for the value of the company's automotive business and renewed expectations that shareholders could benefit from further corporate action.

Genuine Parts Company’s stock closed at $132.57 on Thursday in New York, up 12.9% from Wednesday’s close. The stock is up 7.7% year-to-date.

Meanwhile, O’Reilly Automotive’s stock dropped 2.6% to $90.25 at Thursday’s close, remaining mostly level year-to-date.

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