LKQ Corporation completes Uni-Select acquisition, reiterates GSF divestment

On 3 August, LKQ Corporation (LKQ) and Uni-Select Inc confirmed that the previously-announced acquisition of Uni-Select by 9485‑4692 Québec Inc, which is a wholly-owned subsidiary of LKQ, officially completed on 1 August 2023. This news comes in parallel with a complex and ongoing monopoly-related investigation by UK authorities.

In the UK, the initial acquisition news resulted in the opening of a merger inquiry by the Competition and Markets Authority (CMA) on 15 June. On 21 July, the CMA found that – at that point – the “merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom”.

Indeed, the CMA’s investigation found that the merger could “reduce competition in the supply of car parts, as well as garage equipment, to independent garages and workshops in 145 local areas and the supply of car parts to national and multi-regional customers across the UK”. Moreover, the CMA also found that competition could be reduced in the supply of car parts to retail customers in 172 local areas.

At the time, Sorcha O’Carroll, CMA Senior Director of Mergers, said: “Early on, we identified that this deal could lead to higher prices and worse choice for customers across the UK. We will now carefully consider the proposal put forward by LKQ and Uni-Select which they believe could address our concerns, before deciding on the next step.”

In response, Uni-Select reported that the company was offering “undertakings in lieu of reference” or “UILs” in order to address concerns about the impact on markets in the United Kingdom. That specifically meant committing to “the divestiture of Uni‑Select’s GSF Car Parts business”.

However, on 31 July the CMA served an initial enforcement order which was swiftly followed by three derogation statements between 2 and 4 August relating to the UILs. Nevertheless, the CMA has until 2 October 2023 to decide whether to accept the undertakings with the possibility to extend this to 27 November 2023 if it considers that there are special reasons for doing so.

Meanwhile, on 1 August 2023, GSF Car Parts president and COO Sukhbir Kapoor reiterated the company’s divestment process: “GSF Car Parts will continue to operate with total independence from LKQ Corporation during the transitionary period between the completion of the arrangement and the divestment of GSF.

“Early on, we identified that this deal could lead to higher prices and worse choice for customers across the UK. We will now carefully consider the proposal put forward by LKQ and Uni-Select which they believe could address our concerns, before deciding on the next step.” Sorcha O’Carroll, Competition and Markets Authority, Senior Director of Mergers, 21 July 2023

“Our 180 branches remain open for business as usual and will continue to offer excellent service to trade and retail customers. We look forward to the pending completion of the divestment and beginning the next chapter in GSF’s journey as a leading motor factor in the UK.”

In other words, all things considered, despite announcing plans to divest GSF Car Parts in March 2023 and submitting “undertakings in lieu of reference” in July, as well as announcing the completion of its acquisition of Uni-Select in March, LKQ could still technically be under CMA investigation in the UK until the end of the year.

Over 20,000 customer accounts in the UK

With over 5,200 employees in Canada, the US and the UK, Uni-Select is a leader in the distribution of automotive refinish and industrial coatings and related products in North America, as well as a leader in the automotive aftermarket parts business in Canada and in the UK.

In the UK, Uni-Select, has been a major distributor of automotive parts supporting over 20,000 customer accounts with over 175 company-operated stores through GSF Car Parts.  Uni-Select bought Parts Alliance for £205 million in August 2017.

As a result of the completion of the transaction, the shares of Uni-Select will be de-listed from the Toronto Stock Exchange “shortly”, according to a Uni-Select.