Vertu Motors paid Inchcape £18.7m in cash for five Cooper BMW and Mini dealerships – sites which last year made a loss of £6m.
The acquisition comprises of 12 outlets located in York, Sunderland, Teesside, Durham and Malton – as reported by Car Dealer yesterday – and includes BMW, Mini, a Motorrad motorcycle operation and a used car business.
In 2019 the dealerships generated £305m of revenue and a loss before tax of £6m.
Vertu told the Stock Market this morning that it has funded the purchase with a £12.76m 20-year mortgage from BMW secured on the properties.
The group said it paid £18.7m cash together with the assumption of the manufacturer’s used stocking finance of £8.9m for the sites.
And at the same time as revealing the deal, the group said profit was well ahead of last year – up 15 per cent for the nine months to the end of November.
Vertu will now be working hard to turn the BMW businesses around and expects the deal to be ‘earnings neutral’ by the end of the group’s 2023 financial year.
The deal means Vertu now represents 32 franchises in the UK, ‘more than any other automotive retailer’.
CEO Robert Forrester said: ‘We are delighted to announce the introduction of the much sought after BMW, Mini and Motorrad franchises to the group, previously a gap in our portfolio of manufacturer partners.
‘The addition of these franchises has long been a strategic objective of the group. The acquisition achieves immediate scale in a region where the group is headquartered and already has strong representation.
‘The business has previously performed at a high level and it is our intention to ensure that it returns to this previous success delivering both for customers and financially.’
BMW UK MD Graeme Grieve revealed BMW had been working with Vertu for a number of years as it looked to bring the group in as a partner.
He praised Vertu’s ‘energy’ and professionalism’, and added: ‘We very much look forward to working closely with Vertu, to ensure customers in the North East and Yorkshire have an excellent customer experience with our brands.’
On the positive financial performance, the group said it has benefitted from continued business rates holidays for showrooms, furlough grants and cost savings.
The statement said: ‘The group is now trading approximately 15 per cent above last year at an adjusted PBT level, despite the impact of the further national lockdown in England from 5 November to 2 December on vehicle sales.’
Vertu said trading performance ‘remains uncertain’ for the rest of the group’s financial year as further Covid restrictions and the impact of Brexit could cost the business.
It also admitted the acquired businesses will continue to make a loss for the remainder of the group’s financial year.
Despite this, analysts were impressed with the group’s performance and the BMW dealership deal.
Liberum motor trade analyst Sanjay Vidyarthi recommended investors bought shares in an update.
He wrote: ‘Vertu has made an excellent acquisition, partnering with BMW for the first time.
‘We think the deal has been struck on favourable terms. The assets are currently loss-making, but we back Vertu management to turn the business around.’
Car Dealer first reported that Vertu was interested in buying the Inchcape dealerships in October.
Inchcape refused to comment at the time when we reported a number of groups were circling its BMW portfolio.
Following our story, Vertu Motors made an unscheduled announcement to the Stock Market to confirm it was in discussions.