REG - Inchcape PLC - Disposal of UK Retail operations

InchcapeAnnouncement

15/04/2024 07:00

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RNS Number : 5314K  Inchcape PLC  15 April 2024

 
 
 
                15 April 2024

 

THIS ANNOUNCEMENT AND THE INFORMATION HEREIN IS NOT FOR RELEASE, PUBLICATION
OR DISTRIBUTION IN ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

 

THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION

 

Disposal of UK Retail operations

 

Inchcape plc to sell its UK Retail operations to Group 1 for cash
consideration of approximately £346m

 

Transaction highlights

·     Inchcape plc ("Inchcape" or "the Group") agrees the sale of its UK
Retail operations to Group 1 Automotive UK Limited for cash consideration of
approximately £346m;

·     Transaction consistent with Inchcape's strategic focus on higher
margin, capital-light, cash generative, diversified, scalable and global
Distribution business. Following the disposal, Inchcape will substantially be
a Distribution-focussed business;

·     Following completion of transaction, expected during Q3 2024, it is
intended that £100m of the proceeds will be returned to Inchcape shareholders
by means of a share buyback programme, which is expected to be completed
within 12 months.

Inchcape, the leading global automotive distributor, today announces that,
following a review of strategic options announced in January 2024, it has
agreed to sell its UK Retail operations to Group 1 Automotive UK Limited, a
wholly-owned subsidiary of Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1"),
for a cash consideration of approximately £346m.

Information on Inchcape's UK Retail operations and Group 1

In FY2023, Inchcape's UK Retail operations generated revenue of £2,065m, 18%
of Group revenue, and adjusted operating profit of £49m 1 , 7% of Group
operating profit. Inchcape's UK Retail operations employ around 3,600 people
in over 80 sites in the UK, with 12 OEM partners. The gross assets of
Inchcape's UK Retail operations as at 31 December 2023 were £752m (including
£183m of freehold property and £336m of inventory) and after deducting
liabilities, the transaction is expected to result in a gain on disposal.

Group 1 has operated in the UK since 2007 and has a growing presence in the
UK, representing 15 OEM brands, with the majority of its 55 dealerships in the
UK based in the South East and East of England, where it employs around 3,300
people. Group 1 represents 35 OEM brands, across 202 dealerships, employing
approximately 16,000 people. Group 1 generated revenue of $18 billion in FY
2023, of which its UK business contributed $3 billion.

Planned use of proceeds and transaction process

Following completion of the transaction, it is intended that £100m of the
proceeds will be returned to shareholders by means of a share buyback
programme, which is expected to be completed within 12 months. The remaining
proceeds will be used to invest in future growth, through organic investment
and value-accretive acquisitions.

The transaction is 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 is expected to complete during Q3
2024.

The transaction constitutes a Class 2 transaction for the purposes of the UK
Financial Conduct Authority's Listing Rules and, as such, does not require
Inchcape shareholders' approval.

Inchcape's UK Retail operations will be accounted for as an asset
held-for-sale and a discontinued operation following completion.

Strategic rationale of transaction for Inchcape

The disposal of the Group's UK Retail operations will complete Inchcape's
transformation into a substantially distribution-focussed business. This is in
fulfilment of Inchcape's strategic decision to focus on its higher margin,
capital-light, high returns, cash generative global Distribution business. The
distribution value chain includes such elements as product planning,
logistics, channel management and aftersales, while retail is specifically
focused on car dealerships.  The Group's Distribution business will continue
to retain elements of automotive retail within its infrastructure in certain
markets, as appropriate, where it drives economic and commercial value for
Inchcape and its OEM partners.

As part of the Group's strategic approach, since 2016, Inchcape has divested
approximately £2.4 billion 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.

As the automotive landscape evolves and the challenges facing the Group's OEM
partners become more complex, OEMs are seeking technology-enabled distribution
solutions to develop their brands. Inchcape's differentiated distribution
platform encompasses advanced digital and data capabilities, global presence,
local insights and customer-centric innovation to unlock opportunities for OEM
partners in complex markets. For Inchcape, this enhanced focus on distribution
represents a compelling multi-year growth and value creation opportunity.

Duncan Tait, Group Chief Executive of Inchcape, 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."

Daryl Kenningham, President and Chief Executive Officer of Group 1 Automotive,
said: ''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."

A copy of this announcement will be available at www.inchcape.com
(http://www.inchcape.com) . Inchcape will publish a trading update for Q1 2024
on Thursday 25(th) April 2024, at 07:00 (UK time).

 

Contacts

 Inchcape plc

 (Investor queries):
 Rob Gurner               +44 (0)7825 189 088   investors@inchcape.com (mailto:investors@inchcape.com)
 Krishma Arora

 Dentons Global Advisors

 (Media queries)
 James Melville-Ross      +44 (0) 207 664 5095  inchcape@dentonsglobaladvisors.com (mailto:inchcape@dentonsglobaladvisors.com)
 James Styles
 Karen Kennedy

 

N.M. Rothschild & Sons Limited ("Rothschild & Co") is acting as the
sole financial adviser to Inchcape Management (Services) Limited in connection
with the Transaction. Herbert Smith Freehills is acting as legal adviser to
Inchcape on the Transaction.

About Inchcape

Inchcape is the leading global automotive distributor, with operations across
six continents.

 

By combining our in-market expertise with our unique technology and advanced
data analytics, we create innovative customer experiences that deliver
outstanding performance for our partners - building stronger automotive brands
and creating sustainable growth.

 

Our distribution platform connects the products of mobility companies with
customers, and our responsibilities span product planning and pricing, import
and logistics, brand and marketing to operating digital sales, managing
physical sales and aftermarket service channels.

 

Delivering for our partners, our customers and our people - so they can
realise their ambitions in the new world of mobility.

 

The Group is headquartered in London and employs around 22,000 people
globally.

 

www.inchcape.com (http://www.inchcape.com)

About Group 1 Automotive, Inc.

Group 1 owns and operates 202 automotive dealerships, 265 franchises, and 43
collision centers in the United States and the United Kingdom that offer 35
brands of automobiles. Through its dealerships and omni-channel platform, the
Company sells new and used cars and light trucks; arranges related vehicle
financing; sells service and insurance contracts; provides automotive
maintenance and repair services; and sells vehicle parts.

 

Group 1 discloses additional information about the Company, its business, and
its results of operations at www.group1corp.com, www.group1auto.com,
www.group1collision.com, www.acceleride.com, www.facebook.com/group1auto, and
www.twitter.com/group1auto.

 

Important notices

This Announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of the United
Kingdom's domestic law by virtue of the European Union (Withdrawal) Act 2018
("UK MAR") and is issued on behalf of the Company by Tamsin Waterhouse, Group
Company Secretary. This Announcement is issued at 0700 BST on 15 April 2024.
This Announcement is not intended to, and does not constitute, or form part
of, any offer to sell or issue or any solicitation of an offer to purchase,
subscribe for, or otherwise acquire, any securities or a solicitation of any
vote or approval in any jurisdiction.

 

Rothschild & Co is authorised and regulated by the FCA in the United
Kingdom and is acting exclusively for Inchcape Management (Services) Limited
and no one else in connection with the contents of this Announcement and any
other matters referred to in this Announcement and will not regard any other
person(s) (whether or not a recipient(s) of this Announcement) as a client(s)
of Rothschild & Co in relation to any other matter(s) referred to in this
Announcement and will not be responsible to anyone other than Inchcape
Management (Services) Limited for providing the protections afforded to
clients of Rothschild & Co, or for providing financial advice, in relation
to the contents of this Announcement or any other matter(s) or arrangement(s)
referred to in this Announcement.

 

Rothschild & Co does not accept any responsibility whatsoever for the
contents of this Announcement, including its accuracy, completeness or
verification, or for any other statement made or purported to be made by
Rothschild & Co, or on Rothschild & Co's behalf, in connection with
the Company, Inchcape and/or any other transaction(s) or arrangement(s)
referred to in this Announcement. Rothschild & Co accordingly disclaims,
to the fullest extent permitted by applicable law, all and any duty, liability
or responsibility whatsoever whether arising in tort, contract or otherwise,
which Rothschild & Co might otherwise have in respect of this Announcement
or any such statement. No representation or warranty, express or implied, is
made by Rothschild & Co and/or any of Rothschild & Co's respective
affiliates as to the accuracy, completeness, verification or sufficiency of
the information set out in this Announcement, and nothing in this Announcement
will be relied upon as a promise or representation in this respect, whether or
not to the past or future, provided that nothing in this paragraph shall seek
to exclude or limit any responsibilities or liabilities which may arise under
the Financial Services and Markets Act 2000 or the regulatory regime
established thereunder.

 

Cautionary statement regarding forward-looking statements

This Announcement may contain "forward-looking statements" with respect to
certain of the Company's plans and its current goals and expectations relating
to its future financial condition, performance, strategic initiatives,
objectives and results. Forward-looking statements sometimes use words such as
"aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal",
"believe", "seek", "may", "could", "outlook" or other words of similar
meaning. By their nature, all forward-looking statements involve risk and
uncertainty because they are based on numerous assumptions regarding
Inchcape's present and future business strategies, relate to future events and
depend on circumstances which are or may be beyond the control of Inchcape
and/or Group 1 and which could cause actual results of trends to differ
materially from those made in or suggested by the forward-looking statements
in this Announcement, including, but not limited to, domestic and global
economic business conditions; market-related risks such as fluctuations in
interest rates; the policies and actions of governmental and regulatory
authorities; the effect of competition, inflation and deflation; the impact of
legislative, fiscal, tax and regulatory developments in the jurisdictions in
which Inchcape and Group 1 and their respective affiliates operate; the effect
of volatility in the equity, capital and credit markets on profitability and
ability to access capital and credit; a decline in credit ratings of Inchcape
and/or Group 1; the effect of operational and integration risks; an unexpected
decline in revenues for Inchcape or Group 1; inability to realise anticipated
synergies; any limitations of internal financial reporting controls; and the
loss of key personnel. Any forward-looking statements made in this
Announcement by or on behalf of Inchcape speak only as of the date they are
made. Save as required by the UK MAR, the Disclosure Guidance and Transparency
Rules, the Listing Rules or by law, the Company undertakes no obligation to
update these forward-looking statements and will not publicly release any
revisions it may make to these forward-looking statements that may occur due
to any change in its expectations or to reflect events or circumstances after
the date of this Announcement.

 1  Adjusted for central overhead allocation.

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