Shares of the ASX-listed ARB Corporation Ltd. (AU:ARB) gained over 6% today after the company announced that it intends to acquire a bigger stake in its U.S.-based affiliate ORW USA. This decision follows ORW’s agreed acquisition of the 4 Wheel Parts business from Hoonigan. ARB stated that if the acquisition goes through, it will raise its stake in ORW from 30% to 50% to help fund the takeover.
ARB Corporation manufactures and sells a wide range of vehicle accessories. Meanwhile, 4 Wheel Parts specializes in performance products and accessories for trucks, jeeps, SUVs, and off-road vehicles. It currently runs 42 retail stores and related e-commerce sites throughout the U.S.
ARB Reveals Details of the Deal
According to ARB’s statement, ORW will acquire 4WP for $30 million. Following this deal, ARB’s stake will jump to 50% in 53 aftermarket stores in the U.S., compared to its previous 30% interest in 11 ORW locations.
Additionally, ARB will separately acquire Poison Spyder from Hoonigan in a transaction valued at $1 million. ARB further stated that both transactions are contingent on court approval, as part of Hoonigan’s court-supervised restructuring in the U.S.
Citi Reviews ARB’s Increased Stake in ORW
Citi analysts praised ARB’s deal, calling it “very positive.” Citi mentioned that the deal would enhance ARB’s control over distribution in the U.S., which is a crucial growth market for the company. Citi expects this deal to boost ARB’s product range in 4WP stores, similar to ORW. This will increase ARB’s visibility and reduce the risk of 4WP prioritizing its private label.
Additionally, Citi analysts believe this transaction improves the chances of ARB’s exports division delivering significant growth in FY25, despite a slow start to the U.S. sales in the first quarter. This division makes up a third of ARB’s total sales.
Consequently, analyst Sam Teeger from Citi reiterated a Buy rating on ARB stock and predicts 13% upside potential.
Is ARB a Good Stock to Buy?
According to TipRanks, ARB stock has received a Hold rating based on three Buys, four Holds, and two Sell recommendations. The ARB Corporation share price target is AU$41.31, which is around 3% lower than the current share price.
