Snap-on to Acquire Hein-Werner
Snap-on Incorporated and Hein- Werner Corporation of Waukesha, WI, jointly announced April 28 that the two companies have signed a merger agreement in which Snap-on will acquire all of the outstanding common stock of Hein-Werner at a price of $12.60 per share in cash, representing a transaction value of approximately $36 million. The transaction has been approved unanimously by the Boards of Directors of both companies.
Under the terms of the agreement, Snap-on will commence a tender offer for all outstanding shares of Hein-Werner stock at a net price of $12.60 per share in cash.
Completion of the tender offer is subject to customary conditions, including the acquisition by Snap-on of 66-2/3rds percent of Hein-Werner common shares on a fully-diluted basis, receipt of necessary governmental approvals and the expiration of applicable waiting periods under the Hart-Scott-Rodino Act.
"The proposed transaction is an excellent strategic fit," said Robert A. Cornog, Snap-on chairman, president and chief executive officer. "It offers compelling synergies to Snap-on, and provides fair value to Hein-Werner shareholders. Hein-Werner markets collision repair products that employ state-of-the-art technology. In addition, the company has excellent relationships with vehicle manufacturers and enjoys a strong international presence, with approximately half of its revenues generated outside the United States. Hein-Werner will complement Snap-on’s recent acquisition of NuTech Industries, Inc. (Brewco) in the area of collision repair technology."
In addition to the acquisition of Brewco, Snap-on also distributes Mitchell mechanical repair information systems through their joint-venture with Thomson Publishing, Mitchell’s parent company. Mitchell’s collision repair information systems, including their estimating and management systems were not part of that agreement.
With the addition of Hein-Werner, however, Snap-on now competes against Mitchell’s collision repair business in the area of computerized structural dimension information. INSIGHT expects Snap-on will take another look at acquiring the collision repair business that currently remains with Mitchell.
Daimler-Benz and Chrysler Merge
Daimler-Benz AG and the Chrysler Corporation have agreed to combine their businesses in what their joint press release issued May 7 calls "a merger of equals" but the business media has called a Daimler acquisition of Chrysler. The deal, a stock swap that values Chrysler at roughly $40 billion will create a new company, to be called DaimlerChrysler.
The combined operation will be incorporated in Germany with headquarters in both Stuttgart, Germany and Detroit, MI. The company will be jointly led by Juergen E. Schrempp and Robert J. Eaton as Co-Chairmen and Co-Chief Executive Officers, though it is anticipated Schrempp will become sole chief executive after an undetermined number of years.
No matter how it is viewed, the two companies combined had total 1997 revenues of approximately $130 billion and combined pre-tax profits of $6.9 billion. DaimlerChrysler will become the world’s fifth-largest automobile manufacturer behind General Motors, Ford, Toyota and Volkswagen. Initial press reports from Eaton indicate that Chrysler and Daimler-Benz will not share dealerships though they will cooperate on “backshop” operations such as parts and service.
CarQuarters Completes Acquisitions and Financing
CarQuarters Collision Repair Centers, the Natick, MA based collision repair facility consolidator, went on an acquisition rampage in late April and early May.
On May 1, they announced the acquisition of Sterling Finish, a 1997 winner of the National Auto Body Shop of the Year award. Sterling Finish operates two facilities located in Lake Villa and Libertyville, IL.
Jon McNeill, co-president of CarQuarters said, "The Sterling team has created two of the most successful large-scale facilities in the country. These facilities are a tour destination for shop owners and insurers alike. Their 72,000 square foot facility in Lake Villa will serve as a hub shop for our Chicago region and a national training center for CarQuarters’ managers and technicians. Gordon and Greg Bockwinkel are truly visionaries. They have created the shop and the shop management system technology of the future and these will be showcase locations for CarQuarters."
Gordon Bockwinkel, one of the principal owners of Sterling, will serve in a new role as a regional president for the company. Bockwinkel remarked, "We looked long and hard at all of our options. In fact, we spent the past year weighing our options as potential consolidators ourselves. In the end, we feel that the CarQuarters’ approach is superior to any of the other consolidators and we are excited about joining the CarQuarters’ team."
Jon McNeill, co-president of CarQuarters added, "Sterling is our entry point into the Chicago market. Over the next several weeks, we will be announcing several additional acquisitions that will complement Sterling and increase our presence in what will be one of CarQuarters’ largest markets in the country."
On May 11, CarQuarters announced the acquisition of four more auto body repair facilities.
Yossi’s Auto Center, Inc., of Houston, TX was acquired in April. Yossi’s is CarQuarters’ fourth store in Houston. Ideal Auto Body, with facilities in Ann Arbor and Ypsilanti, MI, was added to the company’s Southeast Michigan region in May.
Hershey Collision, a two year old shop in Hershey, PA, was acquired shortly thereafter.
On May 18 CarQuarters announced the closing of a $25.5 million second round of financing with its original investors including the private equity arm of Conning Corporation. In addition, Berkshire Partners, LLC, the Boston-based private equity investment firm joined the investor group and took a lead role in the second round financing. Terms of the transaction were not disclosed.
Conning is active in a full range of investment management and research services for the insurance industry. Conning's private equity group has over $300 million under management and has made investments in a variety of companies related to the insurance and financial industries including software, banking, insurance and managed care.
Berkshire Partners, LLC is an active investor in the private equity marker with over $750 million under management. Berkshire has developed specific industry experience in several areas including retailing and related services, surface transportation, wireless communications, and various manufacturing sectors. Berkshire has invested in over 50 operating companies with combined revenues in excess of $6.0 billion.
Caliber Appoints Bill Lawrence as Chief Operating Officer
Caliber Collision Centers announced May 8 the appointment of Bill Lawrence as its chief operating officer and senior vice president.
Lawrence, a 28-year veteran of Allstate, was an architect and corporate strategist responsible for its Pro-Shop DRP, as well as the executive in charge of physical damage claims. Lawrence also served as president of Allstate’s Tech-Cor subsidiary.
Lawrence will have responsibility for collision repair operations as well as associated corporate support functions.
"Bill is a highly talented, well-known, and highly regarded insurance industry executive who has been thinking ‘outside the box’ about collision repair for more than a decade," said Matthew Ohrnstein, chief executive officer. "He has the experience and values that Caliber seeks in its people. Bill’s focus on bringing value to all the parties in collision repair is a great fit with Caliber’s approach. We are pleased to welcome him as our head of operations and we expect he will continue to lead change in the industry."
After leaving Allstate last fall, Lawrence initially pursued shop consolidation opportunities with Eddie Cheskis, formerly of CCC and now associated with Gerbers in Chicago, IL.
According to Lawrence, "Over the past several months, I have met with many who are seeking to redefine the fundamentals of the collision repair industry. While building a collision repair organization from the ground-up appeared the route I would take, the professionalism of Caliber convinced me this is the best place to realize my personal goals."
Lawrence continued, "I’ve visited Caliber’s stores and am impressed with the experience and the quality repairs produced by the facilities. Building upon that experience to raise the performance of existing facilities and integrating future acquisitions is an opportunity I look forward to fulfilling."
April CIC Meeting Focuses on Materials and Parts
Waikiki was the site for the Collision Industry Conference (CIC) held on April 23-24 and the scene for some notable discussions on the formula for calculating paint materials costs and when is it appropriate to use OEM, non-OEM, and salvaged parts.
Jack Caldwell presented the recent findings of the Materials Estimating Task Force. Following Caldwell’s presentation, CIC Chairman Erick Bickett stated that he had received a few phone calls from people who felt that the current system of using an hourly rate as a factor in calculating paint material costs should be left alone. These people felt that CIC should stay out of any attempts to change it. Bickett inquired of the audience if they, too, felt the same way. (Editor’s Note: See ‘Materials Estimating Task Force Presents Preliminary Findings’ following this article.)
The general consensus of those that spoke was that CIC was the place to seek a solution to this antiquated system.
Mitchell’s Tom Fleming pointed out that his company’s products (the Mitchell Materials Estimating Guide book and Refinish Material Calculator software) already meet many of the criteria set forth by the task force. "We have a product that’s out there that is viable," said Fleming, "and that is accepted by state legislation." He added that Mitchell was open to licensing these products to other companies providing estimating systems.
Also of note, the panel discussion on parts usage brought forth many strong opinions from those in attendance.
Mike Melfi, of CCRE and Automotive Service Professionals of Illinois, commented, "Today most manufacturers offer minimum 5-year, 100,000 mile warranties and some as high as 8-year, unlimited miles. They’ve also issued position statements which state they will not warranty parts that were not manufactured by them nor any adjacent parts that might be adversely affected by non-OEM components."
Melfi further added that he thought there was fraud involved when an insurer knowingly requires the use of non-OEM parts in these vehicles, and that it makes it difficult for a shop to offer a lifetime guarantee on repairs knowing that the parts may be inferior.
Art Dahm of Southeast Toyota confirmed what Melfi said with regards to Toyota: "When using salvage parts, counterfeit or aftermarket parts, not new OEM, the warranty is invalid and any damage to adjacent parts is not covered."
Mark Buessing, vice president of the Automotive Recyclers Association (ARA) emphasized that there are three good reasons to use a salvage part:
- Price - is usually 50 percent or less of the OEM part;
- Availability - the advantage of getting a full assembly when some OEM parts are on back order;
- Quality - comparable because they most often deal in OEM parts.
Rod Enlow from USAA, stated, "It is our desire to purchase and place only parts on customer and claimant vehicles that are the equivalent of the damaged part in every tangible way." Enlow acknowledged that OEM parts are the best, and that the industry average use of OEM parts is 80 percent.
Next to OEM parts, USAA likes to use what Enlow calls "experienced" parts (salvage). He explained that they do represent a good value and can reduce cycle times. But, they are only cost effective when these recyclable parts are carefully removed from the “donor” vehicle.
USAA warrants all aftermarket and LKQ parts for proper function, fit, finish and corrosion protection up to the original warranty, or one year from the repair time, whichever is greater. Any part identified as substandard will be repaired or replaced to the customer’s satisfaction at no cost.
Enlow emphasized that USAA does not allow the use of salvaged parts related to safety systems such as suspension, steering, and passive restraint systems. "As far as I know, there is no way to test the proper function of a (non-deployed, salvaged) airbag system and until someone can show us that is doable, we will have nothing to do with them.'
Other matters discussed at the meeting included the Write it Right Committee’s "Best Practices" Guidelines for Estimating and Processing Auto Physical Damage Claims. This document has been mailed to the CIC mailing list and will also be distributed to high-level insurance company executives. It was also suggested that the Parts and Airbags Committee set up a demonstration at the next meeting comparing OEM and CAPA-certified parts.
The next CIC meeting will be in Orlando, FL, on July 29. For more info, visit the INSIGHT website at: http://www.collision-insight.com or call CIC at: (509)547-3810.
CIC Materials Estimating Task Force Presents Preliminary Findings
The CIC Materials Estimating Task Force presented their preliminary findings based upon the discussion at the first Task Force meeting, held March 24 in Cleveland, OH. The meeting was attended by 17 people representing shops, insurers, information providers, jobbers, paint manufacturers and industry associations.
According to Charlie Baker, INSIGHT’s publisher and chair of the Task Force, "Broad-based agreement exists that a more fair and accurate system to determine materials usage and reimbursement can be developed."
Prior to the March meeting, the Task Force had identified the following required elements of a new system for calculating materials charges by repair facilities:
- Computer not required but automation "ready"
- No caps or trigger points on cost totals
- Not tied to refinish times
- Allows for different fluids costs
- Does not favor any one supplier
- Allows shop to determine pricing "level" based on supplier and/or color
- System for pricing works off refinish list based on 1 gallon intermix systems
- Overall paint and materials to be treated as a "part" for estimating purposes.
Additionally, at the meeting in March, suggested criteria for Materials Estimating System development included:
- System for refinish materials only as defined in the Mitchell Materials Estimating Guide. No body materials or refinish department supplies such as fillers, etc.
- System to have no caps or thresholds. All refinished surface area would be accounted for with the system.
- No deduction for "overlap" with adjacent panels.
- Blend allowance at an average 50 percent of panels refinished would be built into the system.
- Paint allowances would be based on material specifications of the OEs regarding material types and required steps.
- A multiplier for repaired versus new panels would be a part of the system.
- Paint materials "costs" per square foot for three levels of VOC (Rule 1151, Rule 45, and National Rule) and three "average" colors will be provided to data providers by the paint companies.
- A minimum materials cost of what might be today considered equal to an hour, or equivalent to 5 square feet, would be built into the system to allow for small parts and spot work.
- Refinish materials will be viewed overall as a "part" and it is expected that a system will, on average, provide a shop with GPM equal to overall parts averages.
- Data providers will provide a suggested "cost" based on a yet to be determined number of colors and VOC levels.
- These costs will be based on surface area.
- Surface area calculations will be provided for parts by the data providers.
These initial criteria were developed by the task force and are being circulated for comment from industry members.
(Editor’s Note: For further information, or to comment on the proposed requirements, check the WWW at http://www.collision-insight.com/paint/ or submit comments directly to Charlie Baker: Phone: (800) 860-2744; FAX: (440)729-0927; E-mail: cbaker@harborcom.net)
SCRS to Host Trade Show-Profits to Return to Industry
The Society of Collision Repair Specialists (SCRS) has announced they plan to produce a collision industry trade show- Collision One to One. The first event will be held in Denver, CO, on April 9-11, 1999.
According to SCRS the decision to create the event is born from an interest to get back to basics and communicate with the grass roots level of the industry.
According to John Loftus, executive director for SCRS. "Collision One to One gives us a greater opportunity to work with local leaders and associations to bring a trade show and seminars within easy reach of their area of the country."
One interesting aspect of the show sure to delight exhibitors, individual vendor exhibits will be limited in size and booth fees will include carpeting, electricity, registrant information systems, plus inclusion in all activities related to the event, such as the exhibitor party and association night. Individual exhibitor sponsored parties will be prohibited to keep costs down. SCRS also plans to return all profits from the event back to the worthy groups working within the industry. A committee has been established to set guidelines for accepting applications for disbursement of the dollars.
(Editor’s Note: This bit of news is interesting, if for no other reason than the fact that ASA and SCRS recently issued a press release stating they were cooperating in several areas for the betterment of the industry.
ASA certainly must feel slighted with the SCRS announcement of a "competing" trade show for NACE. But, their concern is misplaced.
NACE’s reputation is well established. Though suppliers are concerned about the increasing cost of participation, NACE will remain the premier event in the U.S. for many years.)
Allstate Canada and ICBC Host Their Direct Repair Shops
Allstate Canada hosted more than 75 collision repair facilities on May 6-7 that participate in their Canadian PRO Direct Repair Program. Sponsored in part by MPX Data Systems, Inc., Mitchell’s Ontario dealer, the program included a variety of speakers, including Charles Baker, publisher of INSIGHT, who spoke on industry trends and the impact of consolidation and industrialization.
Allstate management provided an overview of the current and future direction of DRP in Canada as well as recognition of shops with high CSI and quality as determined through a reinspection program that covers approximately 20 percent of repairs.
The hosting of Allstate PRO Shops is the second example of insurers providing educational opportunities for shops in Canada.
In April, ICBC, in Vancouver, hosted over 400 shops for a two-day program. This program was hosted in part by ADP, which, as announced at the workshop, is the exclusive supplier of estimating and imaging systems to ICBC. Shops at both of these events had a chance to ask questions and discuss issues with the insurer in an open forum, something that really does not happen often enough, but should, here in the U.S.
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