Acquisitions and Equity Investments

The Company acquired several companies and equity investments for approximately $1,457,000,000, $420,000,000, and $140,000,000, net of cash acquired, during the years ended December 31, 2017, 2016, and 2015, respectively. Aside from the AAG acquisition and the Inenco investment in 2017, the remaining acquisitions are considered individually immaterial, as well as immaterial in the aggregate.

2017

A significant portion of the acquisitions made in 2017 included twelve companies in the Automotive Parts Group, two companies in the Industrial Group, and one company in the Electrical/Electronic Materials Group. The purchase price for these fifteen acquisitions was approximately $1,334,000,000, net of cash acquired.

Automotive Parts Group

The twelve Automotive Parts Group acquisitions generate annual revenues of approximately $1,900,000,000. In the U.S., the Company acquired Standard Motor Parts, which operates five locations, as well as Olympic Brake Supply, which operates six locations, in January and February 2017, respectively. Additionally, the Company added 14 new locations with the acquisition of Merle's Automotive Supply in May 2017 and 17 new locations with the addition of Monroe Motor Products in November 2017. In June 2017, the Company also added four new locations to its heavy vehicle parts operations with the acquisition of Stone Truck Parts.

The Company expanded its distribution network in Australia with the addition of three single-location businesses, including Welch Auto Parts in July 2017, Logan City autoBarn in August 2017, subsequently re-branded as a NAPA Auto Super Store, and Sulco Tools and Equipment in September 2017. In Canada, the Company acquired Service de Freins Montreal Ltee, with 4 locations and Belcher Parts and Attachments with one location in April 2017. In December 2017, the Company acquired Universal Supply Group, which has 21 locations in Canada serving the automotive, paint and body and heavy vehicle sectors.

In November 2017, the Company acquired AAG, which is discussed further below.

Industrial Group

The two Industrial Group acquisitions generate annual revenues of approximately $118,000,000. In August 2017, the Company acquired Numatic Engineering, a distributor of automation products. In November 2017, the Company acquired Apache Hose & Belting Company, Inc. ("Apache") and operates in seven locations in the U.S. Apache specializes in value-added fabrication of belts, hoses and other industrial products.

Electrical/Electronic Materials Group

The Electrical/Electronic Materials Group acquisition generates annual revenues of approximately $65,000,000. In April 2017, the Company acquired Empire Wire and Supply ("Empire"), an innovative provider of custom cable assemblies and distributor of network, electrical, automation and safety products. Empire operates from three locations in the U.S., as well as one location in Canada.

Net sales from these fifteen acquisitions included in the Company's consolidated statement of income and comprehensive income at December 31, 2017 were approximately $429,000,000.

For each acquisition, the Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Company’s consolidated statements of income and comprehensive income beginning on their respective acquisition dates. The Company recorded approximately $1,926,000,000 of goodwill and other intangible assets associated with the 2017 acquisitions. Other intangible assets acquired consisted of customer relationships of $619,000,000, trademarks of $176,000,000, and other intangibles of $1,000,000 with weighted average amortization lives of 19, 27, and 2 years, respectively.

Additional disclosures for the 2017 automotive acquisition of AAG and the Inenco investment are provided below.

Alliance Automotive Group

The Company acquired all of the equity interests in AAG for approximately $1,080,000,000 in cash on November 2, 2017. The net cash consideration transferred of approximately $1,080,000,000 is net of the cash acquired of approximately $109,000,000. AAG, which is headquartered in London, is the second largest parts distribution platform in Europe, based on revenues, with a focus on light and commercial vehicle replacement parts distributed to the independent aftermarket in France, Germany, the U.K., and a recently acquired subsidiary in Poland. AAG has approximately 8,000 employees and over 2,000 company-owned stores and affiliated outlets across France, the U.K., Germany, and Poland, with annual revenues of approximately $1,700,000,000.

Coincident with the transaction, GPC repaid a majority of AAG’s debt including publicly held notes and a revolving credit facility with a banking group, including accrued interest, for approximately $825,000,000. The acquisition and subsequent redemption of substantially all acquired debt, was financed using a combination of new borrowings under a term loan, five private placement notes, and borrowings under increased credit facilities.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. The Company is in the process of analyzing the estimated values of all assets acquired and liabilities assumed as of the acquisition date, including, among other things, obtaining final valuations of certain tangible and intangible assets, as well as the fair value of certain contracts and the determination of certain tax balances. The allocation of the purchase price is therefore preliminary and subject to revision.



	November 2, 2017
	(In Thousands)
Trade accounts receivable	$	380,000
Merchandise inventories	374,000
Prepaid expenses and other current assets	213,000
Intangible assets	727,000
Deferred tax assets	4,000
Other assets	25,000
Property and equipment	93,000
Total identifiable assets acquired	1,816,000
Current liabilities	(768,000		)
Long-term debt	(769,000		)
Pension and other post-retirement benefit liabilities	(14,000		)
Deferred tax liabilities	(151,000		)
Other long-term liabilities	(32,000		)
Total liabilities assumed	(1,734,000		)
Net identifiable assets acquired	82,000
Noncontrolling interests in subsidiaries	(38,000		)
Goodwill	1,036,000
Net assets acquired	$	1,080,000

The acquired intangible assets of approximately $727,000,000 were provisionally assigned to customer relationships of $550,000,000, trademarks of $176,000,000, and other intangibles of $1,000,000, with weighted average amortization lives of 19, 27 and 2 years, respectively, for a total weighted average amortizable life of 21 years.

The estimated goodwill recognized as part of the acquisition is not tax deductible and has been assigned to the Automotive segment. The goodwill is attributable primarily to expected synergies and the assembled work- force. The fair values of the non-controlling interests in subsidiaries are at estimated fair values using income approaches.

The amounts of net sales and earnings of AAG included in the Company’s consolidated statements of income and comprehensive income from November 2, 2017 to December 31, 2017 were approximately $256,400,000 in net sales and net income of $0.07 on a per share diluted basis, respectively.

The unaudited pro forma consolidated statements of income and comprehensive income of the Company as if AAG had been included in the consolidated results of the Company for the years ended December 31, 2017 and 2016 would be estimated at $17,627,000,000 and $16,575,000,000 in net sales, respectively, and net income of $4.56 and $4.55 on a per share diluted basis, respectively. The pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the transaction actually occurred at the beginning of these periods, nor is it necessarily indicative of future results.

The adjustments to the pro forma amounts include, but are not limited to, applying the Company’s accounting policies, amortization related to fair value adjustments to intangible assets, one-time purchase accounting adjustments, interest expense on acquisition related debt, and any associated tax effects.

Inenco

Effective April 3, 2017, the Company acquired a 35% investment in the Inenco Group for approximately $72,100,000 from Conbear Holdings Pty Limited ("Conbear"). The equity investment was funded with the Company’s cash on hand. The Inenco Group, which is headquartered in Sydney, Australia, is an industrial distributor of bearings, power transmissions, and seals in Australasia, with annual revenues of approximately $325,000,000 and 161 locations across Australia and New Zealand, as well as an emerging presence in Asia.

The Company and Conbear both have an option to acquire or sell, respectively, the remaining 65% of Inenco at a later date contingent upon certain conditions being satisfied. However, there can be no guarantee that such conditions will be met or, if they are met, whether either company would exercise its option.

2016 and 2015

A significant portion of the 2016 companies acquired included eleven companies in the Automotive Parts Group, five companies in the Industrial Group, two companies in the Business Products Group, and one company in the Electrical/Electronic Materials Group. The purchase price for these nineteen acquisitions was approximately $370,000,000, net of cash acquired. A significant portion of the 2015 companies acquired included one company in the Electrical/Electronic Materials Group, three companies in the Business Products Group, four companies in the Industrial Group, and five store groups in the Automotive Parts Group for approximately $120,000,000, net of cash acquired.

For each acquisition, the Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Company’s consolidated statements of income and comprehensive income beginning on their respective acquisition dates. The Company recorded approximately $260,000,000 and $90,000,000 of goodwill and other intangible assets associated with the 2016, and 2015 acquisitions, respectively. For the 2016 acquisitions, other intangible assets acquired consisted of customer relationships of $112,000,000 and trademarks of $28,000,000 with weighted average amortization lives of 17 and 35 years, respectively. For the 2015 acquisitions, other intangible assets acquired consisted of customer relationships of $39,000,000 with weighted average amortization lives of 15 years.