As you could imagine, the CEO of legendary aftermarket auto parts maker Holley, Tom Tomlinson, has one heck of a garage at home.
"I recently completed a 1973 Camaro — it looks like a 1973 Camaro on the outside, but everything underneath the skin is a modern supercar," Tomlinson told told Yahoo Finance Live. Tomlinson, dabbles in building restomods, owns a Tesla Model 3 Performance and the 707 horsepower Jeep Trackhawk. This writer isn't keen on being the bearer of bad news to a fellow car enthusiast, but Tomlinson will likely have a few less minutes to hang out in his garage admiring those awesome toys in 2021.
Holley — founded in 1903 and known for its Hurst Shifters, Flowmaster exhausts and Hooker Headers — said this week it will merge with SPAC Empower Ltd. and enter public markets. The transaction values Holley at $1.55 billion in a deal expected to close in the second quarter of 2021.
SPAC Empower launched in late October 2020, and is led by former Collective Brands (parent company of Payless ShoeSource) CEO Matt Rubel. Once the deal closes, Rubel will serve as chairman and Holley will continue to be run by Tomlinson (an 18-year plus veteran of Holley) and his management team.
Holley could see a good deal of interest from investors upon its arrival to the public markets for several reasons.
First, the company is an industry leader in an industry characterized by car part upgrade fanatics. And that much showed during the COVID-19 pandemic-ridden 2020 (unlike other SPACs that have come to market of late). Holley disclosed its 2020 sales surged 25% year-over-year to $583 million. Executives estimated in a presentation that its 2020 sales performance made it three times larger than its nearest competitor.
About 40% of the company's 2020 sales came from products developed over the past five years, underscoring the company's strong innovation prowess. The company is now targeting to capitalize on the surging EV space via its electronic control and powertrain products.
Holley improved its operating margins 170 basis points in 2020 to 25.5%. Free cash flow rose to $135 million for the year, up from $102 million a year earlier.
The company sees sales rising 7% in 2021 and 50 basis points of operating margin expansion.
Aside from the favorable financials, Holley — which has built itself via a good number of acquisitions through the years (eight since 2014)— may be poised to secure some new targets soon. The company says it's in active discussions with 15 target companies.
"Our vision is to provide a very complete journey to our enthusiast consumers, so we are constantly looking to categories to fill out the offerings we have for our consumers," Tomlinson said on his thinking about acquisitions.
Like we said, he's a busy car guy about to get busier, perhaps at the detriment of doing a burnout or two in that 707-horsepower Jeep Trackhawk.
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