ARB shares surge on increased stake in US associate ORW USA — Capital Brief

Briefing

Wheel and Deal

The news: ARB Corporation is set to lift its stake in US-based associate ORW USA to free up funding for ORW's acquisition of Colorado-based Hoonigan's 4 Wheel Parts (4WP) business.

The numbers: ORW has entered into a conditional asset purchase agreement to buy 4WP for US$30 million ($44.87 million).

ARB said that if the acquisition proceeds, it will increase its shareholding in ORW from 30% to 50% to provide additional funding for the takeover.

4WP currently operates 42 retail stores and associated ecommerce sites, selling 4x4 accessories across the US.

The deal would give ARB a 50% interest in 53 aftermarket stores in the US, up from a 30% interest in 11 ORW stores prior to the transaction.

ARB said it will separately acquire the Poison Spyder brand from Hoonigan for US$1 million.

ARB shares rose 6.1% to $42.26 by 12:30pm AEST.

The context: ARB noted that both deals are subject to court approval, in conjunction with Hoonigan's court-supervised reorganisation in the US.

Citi analysts described the move as "very positive", giving ARB greater control of distribution in the US — its "key growth market".

The transaction also increases the likelihood that ARB's exports division, representing a third of group sales, will deliver strong growth in FY25, with US sales in the first quarter of the fiscal year starting softly, they said.

What they said: Citi analysts said: "We expect this deal would mean ARB has materially improved ranging in 4WP stores going forward, and essentially ARB would become a 'house brand' at 4WP (similar to ORW) which improves ranging and lowers the risk that 4WP focuses on its private label".

"... Expanded and more prominent in-store ranging should also benefit ARB's brand awareness in the US," they said.

The sources: ASX announcement, Citi research