Silverstone Capital LLP – ‘DFAN14A’ on 8/20/07 re: Keystone Automotive Industries Inc

On:  Monday, 8/20/07, at 9:29am ET   ·   Effective:  8/20/07   ·   Accession #:  919574-7-4176   ·   File #:  0-28568

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Additional Definitive Non-Management Proxy Solicitation Material   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DFAN14A     Additional Definitive Non-Management Proxy             3     19K 
                          Solicitation Material                                  

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DFAN14A
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SCHEDULE 14A

(Rule 14a-101)

 INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
 Securities Exchange Act of 1934 (Amendment No.__)

Filed by the Registrant [_]                                                     
Filed by a Party other than the Registrant [X]                                  

Check the appropriate box:                                                      

[_]  Preliminary Proxy Statement                                                
[_]  Confidential, For Use of the                                               
Commission Only (as permitted                                         
by Rule 14a-6(e)(2))                                                  
[_]  Definitive Proxy Statement                                                 
[X]  Definitive Additional Materials                                            
[_]  Soliciting Material Under Rule 14a-12                                      

 KEYSTONE AUTOMOTIVE INDUSTRIES INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

 ROCKHAMPTON MANAGEMENT U.K. LLP
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):                              

[X] No fee required.                                                            
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.    

1) Title of each class of securities to which transaction applies:              
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2) Aggregate number of securities to which transaction applies:                 
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3)   Per unit price or other underlying value of transaction computed pursuant  
    to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):                          
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4) Proposed maximum aggregate value of transaction:                             
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5) Total fee paid:                                                              
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[_] Fee paid previously with preliminary materials:                             
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[_]  Check box if any part of the fee is offset as provided by Exchange Act Rule
  0-11(a)(2) and identify the filing for which the offsetting fee was paid
    previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.                   

1) Amount previously paid:                                            
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2) Form, Schedule or Registration Statement No.:                      
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3) Filing Party:                                                      
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4) Date Filed:                                                        
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DFAN14A
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Explanatory Note

Set forth below is a letter sent by Rockhampton Management U.K. LLP             
("Rockhampton") to the Chairman of the Board of Directors of Keystone Automotive
Industries Inc. ("Keystone") which Rockhampton intends to disseminate via       
published media.                                                                

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DFAN14A
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Dear Mr. Foster,                                                                

Further to the letter dated July 19, 2007 from the undersigned, and following   
the filing by Keystone of its preliminary proxy statement with the U.S.         
Securities and Exchange Commission on August 3, 2007, we are writing once again 
to state our discontent with the price being offered to Keystone shareholders in
the proposed acquisition of the company by LKQ Corporation. Based on the        
transactions presented in the proxy statement, we will vote AGAINST the proposed
deal, primarily because we believe that the price of $48 per share significantly
undervalues Keystone as it stands today. We hope that other shareholders vote   
AGAINST the proposed deal as well.                                              

The strategic rationale as portrayed in the proxy is not compelling. There is   
significant synergy and industrial logic in combining LKQ Corp. and Keystone.   
However, we think there is no logic to the primary concern cited in the         
preliminary proxy of transferring the risk of patent litigation and CAPA        
(Certified Automotive Parts Association) decertification from Keystone          
shareholders to LKQ Corp. shareholders. We believe the Keystone is fully capable
of bearing this risk on its own. In our view, the directors of Keystone appear  
to have over-reacted to the large fall in the stock price subsequent to the     
administrative law judge's ruling in the Ford/ITC action. These types of cases  
have been a persistent thorn in the side of Keystone and LKQ, but management of 
both have consistently stated the view that the industry would ultimately       
prevail. It is notable that LKQ Corp. appears to have taken advantage of this   
share price move to make a run for Keystone. It is also notable that the shares 
of Keystone fully recovered after the initial loss of poise, suggesting that    
shareholders ultimately took a similarly sanguine view of the event.            

The fairness opinion is not fair to Keystone shareholders because, in our view, 
it: (1) uses the wrong set of companies for comparison, (2) does not adequately 
reflect the growth and margin expansion of the company relative to others, and  
(3) does not disclose the operating assumptions supporting the discounted cash  
flow analysis.                                                                  

1.   The best peers for Keystone are LKQ Corp., Genuine Parts Company (and      
   certain other automotive parts distribution businesses such as O'Reilly),
     and industrial distributors such as W.W. Grainger, Fastenal, and Wesco. The
latter serve different end markets than Keystone, but have similar    
    distribution based business models. Their lack of inclusion points, in our
   view, to a lack of understanding of the business model of those providing
     the fairness opinion. Aftermarket service companies and Pep Boys are retail
focused and have different business models.                           

2.   The most serious flaw in the opinion can be put down in one word: GROWTH.  
First, relative to those peers, analysts expect Keystone's business to
  grow, as the independent aftermarket continues to gain market share over
OEM competition because of the compelling price differential. Second, 
 Keystone should see margin expansion as it reduces expenses, which have
risen because of recent investment in capacity, IT, and management    
infrastructure, among other things. Third, industry analysts expect   
  material growth to occur in the market should State Farm reauthorize the
use of aftermarket parts, which these analysts view as inevitable. To 
stress these points:                                                  

 o    We believe margins will increase based on comments from the CEO on
        quarterly conference calls made prior to the deal announcement. This
was amply demonstrated in our previous letter.              

o    Keystone, LKQ Corp., and sell-side analysts have generally       
     acknowledged that State Farm's return to the market is inevitable
        (i.e., authorizing the use of aftermarket parts). However, we do not
     believe that the analysts' consensus reflects the acceleration in
          earnings that should result. Further, and again as demonstrated in our
       previous letter, it is management's view that Keystone will benefit
          more profoundly from State Farm's return to the market than its peers.

     o    Over the past two years, Keystone's quarterly operating profit margins
 have demonstrated a consistent improving trend, increasing by
approximately 135 basis points year-over-year on average.   

   o    We believe that sell-side analysts have underestimated KEYS earnings
   power, as demonstrated by two of the last three quarters having
produced significantly positive earnings surprises.         

3.   Discounted cash flow analysis relies on many assumptions about the future  
     performance of the firm. It is difficult to evaluate the fairness opinion's
discounted cash flow conclusions without knowing what revenue growth, 
  margins, and capital requirements were modeled. However, we believe that
the assumptions used were even lower than the growth implied by the   
sell-side analysts' consensus long-term growth and earnings estimates.

We believe that a leveraged recapitalization would create more value for        
Keystone shareholders than the merger. Keystone has no net debt. We believe that
Keystone is significantly underleveraged compared to the stability of its       
earnings stream. For example, we believe that if the company were to borrow $250
million for a share repurchase at the current bid price it could retire         
approximately 5.2 million or 30% of its outstanding shares. We believe that a   
share repurchase plan of that magnitude would significantly increase the market 
price of Keystone's shares. With a leveraged recapitalization, shareholders     
desiring better liquidity would get it through the share repurchase action, but 
not at the expense of those wishing to see the business plan executed.          

We believe that Keystone is undervalued at $48. Even after the bid and based on 
analysts' reported consensus figures, Keystone's shares appear to us to trade at
about a 10% discount to the peer group mentioned above when considering the 2007
ratio of Enterprise Value to EBITDA. However, the sell side analysts project a  
long term earnings growth rate that is 40% higher then the peer group. In       
addition, we believe that Keystone has the capability to both expand its margins
and re-acquire the State Farm generated business, and that this is not reflected
in consensus. In light of these two factors, we believe Keystone is             
significantly undervalued at $48.                                               

In our view, the sales process was not reasonable. We are perplexed that only   
six private equity firms were consulted. In part this may be a result of        
Keystone's financial advisor positioning Keystone as an automotive aftermarket  
supplier, when in fact it has more in common with distributor business models.  
We believe that there is significant private equity interest in distribution    
businesses. In addition, there is talk in the proxy that the fit with LKQ Corp. 
could not be better from a strategic point of view. We believe that this        
subjective strategic view is not necessarily in the best interests of Keystone's
shareholders. The board consideration ought not to be whether the fit is best   
but whether the price is best. Presumably if the fit with LKQ Corp. is indeed   
the best then LKQ Corp ought to be prepared to pay the best price. Additionally,
we do not believe that a recapitalization was sufficiently considered as an     
alternative to the merger/sale based on the brevity of its mention in Keystone's
preliminary proxy statement.                                                    

In our view, the board needs to take action immediately to renegotiate a        
significantly higher price for this deal, or effect a leveraged recapitalization
of Keystone and an expedient execution of the current business plan. We will    
vote AGAINST this transaction as it has been presented, and hope that other     
shareholders will do the same.                                                  

Yours sincerely,                                                                

Rockhampton Management U.K. LLP                                                 

/s/    Saul Rubin                                                               
---------------------------                                                     
Name:  Saul Rubin                                                               
Title: Member                                                                   
Date:  August 20, 2007                                                          

Forward-Looking Statements                                                      

This letter includes "forward-looking statements" within the meaning of the safe
harbor provisions of the United States Private Securities Litigation Reform Act 
of 1995. Forward-looking statements in this letter are based on current         
expectations that are subject to unknown risks, uncertainties and other factors.
Rockhampton Management U.K. LLP undertakes no obligation and does not intend to 
update these forward-looking statements to reflect events or circumstances      
occurring after the date of this letter to shareholders. You are cautioned not  
to place undue reliance on these forward-looking statements, which speak only as
of the date of this letter to shareholders. All forward-looking statements are  
qualified in their entirety by this cautionary statement.                       

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DFAN14A’ Filing		Date		First		Last			Other Filings
Filed on / Effective on:		8/20/07		3
		8/3/07		3					3,  4,  PREM14A
		7/19/07		3
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