7:51 am, April 15, 2024
Dealer group Inchcape is to sell off its UK retail operations after agreeing a £346m deal with US giant Group 1 Automotive.
Car Dealer reported in January that Inchcape was potentially looking for a buyer for its UK operations which comprise 3,600 employees and 81 sites.
The likes of AutoNation had been linked to the Car Dealer Top 100 outfit but bosses have now announced that Group 1 is the winning bidder.
In an announcement to the London Stock Exchange this morning (Apr 15), the firm said it’s UK retail operations will be sold to Group 1 Automotive UK Limited, a wholly-owned subsidiary of Group 1 Automotive, Inc.
The American outfit has operated in the UK since 2007, representing 15 brands at 55 dealerships.
Once the deal is rubber stamped, Inchcape shareholders will receive £100m of the proceeds via a share buyback programme, which is expected to be completed within 12 months.
Inchcape says the remaining money will be used to invest in future growth, through ‘organic investment and value-accretive acquisitions’.
It is expected that the sale will be completed before the end of Q3, following in the footsteps of the sales of Lookers to Global Auto Holdings and Pendragon to Lithia.
Inchcape represents brands such as Jaguar, Toyota, Volkswagen, Audi and BMW. But selling its showrooms will all the outfit to focus completely on its distribution activities that cover over 40 countries and offer a higher margin.
Once it has finalised the sale, distribution activities will account for over 99% of Inchcape’s global revenue and operating profit, the company told the London Stock Exchange this morning.
‘Right time for a new owner to take business forward’
Explaining the rationale for selling, Duncan Tait, group chief executive of Inchcape, said that the strategic importance of the UK retail operations had become ‘limited’.
Board members therefore felt the time was right to ‘simplify’ the business and allow a new owner to take it forward.
Tait said: ‘As we continue to deliver on our strategic ambition of becoming the leading global distribution partner to our OEM partners worldwide, this transaction represents a significant step along that journey. Our UK Retail business is a high-quality business, with an experienced and high-performing management team, and has been an important part of the Group’s growth.
‘With our active international expansion into higher value distribution activities, the strategic importance of the UK retail operations has become limited. The board has therefore concluded it is the right time for a new owner to take this business forward.
‘This transaction aligns with our strategic priorities, simplifies our business and represents a compelling opportunity to deliver meaningful returns to our shareholders.
‘We believe it will enhance the group’s overall value proposition and enables us to drive growth and long-term value creation for all stakeholders as we further develop our differentiated distribution platform.
‘In Group 1, our UK Retail operations will have a new owner with a strong track record of industry growth, existing presence and retail experience in the UK market and a strong balance sheet.
‘I am grateful to our UK colleagues for building such a high-quality automotive retail network and I’m confident that the business will continue to excel under Group 1’s ownership.’
Following the announcement, bosses at Group 1 said they were ‘delighted’ with the agreement and pledged to ‘build on Inchcape’s strong industry relationships’.
Daryl Kenningham, president and CEO of Group 1 Automotive, added: ‘’We are delighted to have reached an agreement to acquire Inchcape’s UK Retail operations, which we have long admired given the company’s reputation for exceptional customer service, attractive portfolio of OEM brand partners and high-quality management team.
‘With our considerable automotive retail experience in the United States and the UK, we look forward to building on Inchcape’s strong industry relationships and leveraging our expertise to support our combined operations in their next phase of growth.’
Responding to the news, David Kendrick, chief executive and corporate finance partner of chartered accountants UHY Hacker Young, told Car Dealer: ‘This deal is a serious move for Group 1 and really demonstrates their intent across the UK.
‘The inchcape portfolio of circa 80 sites has some fantastic assets in there and huge potential. It’s going to be interesting how some of the OEMs react with their network plans being thrown up in the air again.’
The deal is now awaiting regulatory approval from the Financial Conduct Authority prior to being completed later in the year.
