For 10% higher than its most recent close, Keystone Automotive (NASDAQ: KEYS) has agreed to be acquired by LKQ (NASDAQ: LKQX) for a total purchase price of $811 million. LKQ stepped up and made the move in order to expand its presence in the distribution of replacement auto parts, according to LKQ CEO, Joe Holsten.

LKQ is funding the deal with a credit commitment from Deutsche Bank and Lehman Brothers(NYSE:LEH). In addition, this $1.09 billion in senior financing will also be used to refinance the company's existing debt, probably at more economic interest rates.

This is a very significant acquisition for LKQ considering the financials behind the deal. During the last twelve months, Keystone has done $713 million in sales. This compares to about $833 million in sales for LKQ. In addition, the acquisition price represents more than half of LKQ's existing market capitalization.

I believe this deal makes sense for LKQ shareholders because I think Keystone's earnings will be more appropriately valued under LKQ. For example, at the close yesterday Keystone was trading for just 1x sales and roughly 17.5x next year's earnings. LKQ on the other hand fetches 1.65x sales and nearly 21x forward earnings. Granted Keystone's operating margins were inferior to those of LKQ, As a result of these factors, I tend to believe that Keystone's earnings and sales will receive a higher multiple valuation as part of Keystone.

LKQ is a very interesting stock at these levels - especially considering this acquisition which should close in the fourth quarter of this year. At only 21x forward earnings with projected growth of 19% over the next five years this seems like a very interesting Growth At A Reasonable Price proposition.

On Friday, Nissan Motor's (NASDAQ:NSANY) Chief Executive Officer, Carlos Ghosn, announced he would give up his oversight of the company's operations in North America to focus more on Renault and Nissan. The Japanese car maker is in a tough stretch of late, and warned that it would a lower profit for the year. The company's shares have been trading in a narrow range for years, and the company is looking for a way to reinvigorate its brand. Enter the losing keys promotion.

To promote its new push button ignition system for the 2007 Nissan Altima sedan, the company will be scattering about 60,000 sets of keys in bars, theaters, sports arenas, and parks in several key markets (sorry, couldn't help it). The key tags will have promotional tags like, "If found, please do not return because the Altima has Intelligent Key with push-button ignition, and I no longer need these." If you find a key and log on to the company's website, you can receive a $15 gas card or magazine subscription.

With a total cost for the campaign of less than $100 thousand, I think this is a brilliant marketing campaign. As Spike TV found out rather unfortunately, scattering stuff all over the place is a great way to generate publicity. The fact the key promotion directly ties into the Nissan's push-button ignition system will generate free buzz for this feature. I'm betting that this ad campaign will generate a lot more value, dollar for dollar, than buying air-time for yet another car commercial.

MOST NOTEWORTHY: Digital River Inc (DRIV) was today's only notable initiation.

• American Technology initiated Digital River Inc (NASDAQ: DRIV) with a Buy rating and $65 target. The firm believes Q1 guidance could be weak, but feels weakness would be short-lived as investors gain a better understanding of Digital River's Microsoft Corp- (NASDAQ: MSFT) driven revenue and margin upside in the second-half of 2007...

OTHER INITIATIONS:

• Merriman initiated Idera Pharmaceuticals Inc (AMEX: IDP) with a Buy rating and put fair value at $10-$12 a share.

• Merrill Lynch reinstated Nvidia Corp (NASDAQL NVDA) and KLA-Tencor Corp (NASDAQ: KLAC) with Buy ratings.

• Jefferies initiated CommScope Inc (NYSE: CTV) with a Buy rating and $37.50 target; they believe CommScope is a solid play with trends such as increasing competition among cable operators and wireline service providers as well as increasing bandwidth consumption by enterprises.

• Raymond James started Keystone Automotive Inds Inc (NASDAQ: KEYS) with a Market Perform rating.

• Roth Capital initiated G. Willis Food Int'l Ltd (NASDAQ: WILC) with a Buy rating and 48 target; Roth expects the largest marketer and distributor in Israel of kosher food products to grow at a 15%-20% rate over the next several years.

• JP Morgan initiated Covanta Holding Corp (NYSE: CVA) with a Neutral rating on valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).