Gabelli's Gamco Buys Stake in CSK Auto

Gamco Investors (GBL), the money manager run by Mario J. Gabelli, has acquired a 5.7 million-share stake in CSK Auto (CAO), currently defending itself from unsolicited merger offers, Andrew Ross Sorkin reported yesterday in the New York Times' DealBook.

Earlier this month rival auto part retailer O'Reilly Automotive (ORLY) made an offer of $845 million for CSK, which was rebuffed. As Sorkin explained:

On February 7, CSK agreed to open its books for O’Reilly, so long as the suitor didn’t take the hostile tender offer to its shareholders in what’s known as a standstill agreement. The move allowed O’Reilly to finally begin proper due diligence of CSK, as a reported 20 other potential bidders have done.

CSK’s stock has dropped sharply over the past year amid a great deal of downside for the auto parts retail sector. In December, CSK reported an unexpected $5.8 million loss for its third quarter, spurred by fewer sales, and in January, Standard and Poor’s cut the company's credit rating to B- from B, citing its heavy debt, poor performance and weak internal accounting controls.

As DealBook notes, there are other suitors lined up for CSK, and all players are likely to be affected by the outcome:

O’Reilly may not walk away with CSK. Advance Auto Parts (AAP), an O’Reilly competitor, would also benefit from CSK’s presence on the west coast; indeed, acquiring CSK would put Advance ahead of AutoZone (AZO), the biggest player in the market. But so far, Advance’s executives have been mum on their interest in pursuing a deal.

See also:
Auto Parts Retailers: The Short Case on O'Reilly
A Private Market Value Primer From Mario Gabelli