April 1 (Bloomberg) -- O'Reilly Automotive Inc., the third- biggest U.S. auto-parts chain, agreed to buy CSK Auto Corp. for $528 million, boosting its network by about three-quarters after a yearlong attempt to take over the Phoenix-based retailer.

Both companies gained in trading on U.S. stock exchanges today.

CSK investors will receive $12 for each share, including $1 in cash and $11 in stock, Springfield, Missouri-based O'Reilly said today in a statement. The price is 50 percent more than a bid O'Reilly made earlier this year. O'Reilly will also assume about $500 million of CSK's debt.

CSK gave in to O'Reilly after rejecting the parts chain's advances since March last year. O'Reilly made its intentions public in February with an $8-a-share unsolicited offer. CSK has been seeking a buyer since hiring JPMorgan Chase & Co. as an adviser in December.

``It is a game-changing move for O'Reilly, moving them from a strong regional player to a leader covering over two-thirds of the country,'' Gary Balter, an analyst at Credit Suisse Group in New York who advises investors to buy the shares, wrote in a note today. It's ``a major win for O'Reilly as they are buying a weakened competitor that holds great real estate.''

The combined company will have about 3,200 stores and revenue of about $4.4 billion based on 2007 totals. O'Reilly said the purchase will add ``modestly'' to earnings in 2009. Cost savings may be $100 million annually beginning in 2010.

Shares Rally

CSK, with 1,349 shops in 22 states, runs stores under the Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts and Murray's Discount Auto Stores names. O'Reilly has 1,830 stores.

CSK gained $2.39, or 26 percent, to $11.70 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest increase since February. O'Reilly climbed 89 cents, or 3.1 percent, to $29.41 on the Nasdaq Stock Market.

``I have a high degree of confidence that they'll succeed,'' said Richard Weinhart, an analyst at BMO Capital Markets, who advises investors to hold the shares. ``The question is just the underlying environment, whether that cooperates or not.''

A purchase combines CSK's stores located mostly in the West with O'Reilly's, which are mainly in the Midwest and Southeast, helping O'Reilly narrow the gap with No. 2 retailer Advance Auto Parts Inc.'s 3,261 stores. The biggest auto-parts retailer is AutoZone Inc., with 4,000 locations.

Revenue Structure

CSK will adopt O'Reilly's strategy of deriving half its sales from individuals and the rest from wholesalers, O'Reilly Chief Executive Officer Greg Henslee said in a telephone interview. CSK now gets most of its revenue from do-it- yourselfers, he said.

``The opportunity is to expand that dual-market strategy to the CSK stores and further leverage the fixed expenses that they have,'' Henslee said.

O'Reilly expects to complete the purchase in the next 60 to 90 days, Henslee said on a conference call with analysts and investors. The auto-parts chain will reduce the number of new store openings planned for this year to 140 to 150 stores from an earlier forecast of 205.

The auto parts retailer may co-brand O'Reilly with the CSK brands, though it plans to eventually change all the banners to the O'Reilly name, Henslee said.

Lehman Brothers Inc. was O'Reilly's financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP gave legal advice. JPMorgan and Gibson, Dunn & Crutcher LLP advised CSK.

``For the time being, I'd say that our appetite for major acquisitions will be filled,'' Henslee said in the interview. ``We will be opportunistic in the future once we've integrated CSK.''

O'Reilly received a $1.2 billion credit line from Bank of America Corp. and Lehman to fund the cash portion of the acquisition and other transaction-related expenses, as well as to refinance debt.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net

Last Updated: April 1, 2008 16:37 EDT