Chicago-based replacement auto parts provider LKQ Corp. (LKQ) has announced that it plans to acquire Pittsburgh-based Pittsburgh Glass Works LLC (PGW), a leading manufacturer and distributor of automotive glass products, for $635 million. At the end of 2015, the company announced that it was acquiring Rhiag, an Italy-based automotive mechanical parts distributor, for nearly $1.1 billion using a combination of cash on hand and borrowings from its existing credit facilities. Given the size and timing of these acquisitions, we are concerned that it may prove difficult for LKQ to quickly and efficiently integrate these businesses. Moreover, the company's acquisition of PGW exposes it to intensive manufacturing, which is a deviation from its current distributor model. Therefore, we are downgrading LKQ
