The UK’s Inchcape, the global new vehicle importer, distributor and retailer, said on Monday it would sell its UK retail operations to Group 1, which owns 202 dealerships and 265 franchises covering 35 brands plus 43 collision repair centres in the US and the UK.
The deal will be a US$439m (GBP346m) all cash transaction, inclusive of $279m (GBP220m) of appraised real estate value.
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Inchcape said the sale was consitent with its “strategic focus on higher margin, capital light, cash generative, diversified, scalable and global distribution business and, following the disposal, it would “substantially be a distribution focused business”.
Following completion of the transaction, expected during Q3 2024, Inchcape plans to return GBP100m of the proceeds to shareholders through a share buyback programme expected to be completed within a year. The remaining proceeds will be used to “invest in future growth, through organic investment and value accretive acquisitions”.
In fiscal 2023, the UK retail operations generated revenue of GBP2,065m, 18% of group revenue, and adjusted operating profit of GBP49m, 7% of group operating profit.
Retail operations employs 3,600 people at 80 UK sites selling vehicles made by 12 OEMs. Gross assets at 31 December 2023 were GBP752m (including GBP183m of freehold property and GBP336m of inventory) and, after deducting liabilities, the transaction is expected to result in a gain on disposal.
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By GlobalDataGroup 1 has operated in the UK since 2007 and has a growing presence representing 15 OEM brands with the majority of its 55 dealerships in the UK based in the south east and east of England employing 3,300 people. In total, Group 1 represents 35 OEM brands through 202 dealerships, and employs 16,000.
It generated revenue of US$18bn in fiscal 2023 of which its UK business contributed $3bn.
Inchcape said the proposed sale was “conditional only upon regulatory approval from the Financial Conduct Authority in relation to the change of control of the UK Retail operations’ regulated entity and was expected to complete during Q3 2024”.
It added: “As part of the group’s strategic approach, since 2016, Inchcape has divested approximately GBP2.4bn of retail revenue.
“Following completion of this transaction, the group’s distribution activities will account for over 99% of its global revenue and operating profit.”
Group chief executive Duncan Tait added: “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.”
Daryl Kenningham, president and CEO of Group 1 Automotive, said: “…we have long admired [Inchcape] 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 US 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.”
“These new stores complement our geographic footprint in the east and south east of England and enable us to expand into new markets in the central and north west regions of England and Wales.”
With 54 dealership locations across major hubs in England and Wales, Inchcape’s brand portfolio includes Audi, BMW/Mini, Jaguar Land Rover, Lexus, Mercedes-Benz/Smart, Porsche, Toyota, Volkswagen and Volkswagen Commercial Vehicles. The dealerships sell 63,500 new and used vehicles plus 24,000 fleet vehicles, per year.
Year to date 2024, Group 1 has completed $1bn of acquired revenues, and with this proposed acquisition, total acquired revenues are expected to be approximately $3.7bn on the Q3 closing date.
Adding the Inchcape dealerships will take Group 1’s total UK tally to 109 or 256 locations in the US and the UK.
