- £346 million sale agreed
- Share buyback worth £100 million planned
- Higher margin distribution now the focus
Inchcape’s (INCH) shares revved up 4.5% to 730p on news the global automotive distributor has agreed to sell its UK car retail operations to a US rival for £346 million in cash.
The disposal, which follows a strategic review launched in January, will allow Inchcape to focus on its higher margin and more resilient global distribution business.
The London-headquartered company also plans to return £100 million of the proceeds to shareholders through a buyback on completion of the deal, expected during the third quarter of 2024.
‘The remaining proceeds will be used to invest in future growth, through organic investment and value-accretive acquisitions’, added Inchcape.
TRANSFORMATION COMPLETE
Inchcape is selling its UK care retail assets to New York-listed Group 1 Automotive (GPI:NYSE), which has a growing presence in the UK, where it has operated since 2007.
While Inchcape’s UK car retail business is sizeable, employing roughly 3,600 people across more than 80 UK sites, the operation only represented 7% of the group’s operating profit in the year to December 2023, albeit the revenue contribution was larger at 18%.
‘The disposal of the group’s UK retail operations will complete Inchcape’s transformation into a substantially distribution-focussed business’, explained the company.
‘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.’
WHAT DID THE CEO SAY?
CEO Duncan Tait commented: ‘As we continue to deliver on our strategic ambition of becoming the leading global distribution partner to our OEM (original equipment manufacturer) partners worldwide, this transaction represents a significant step along that journey.’
Tait added: ‘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.’
Shares highlighted Inchcape’s attractions in August 2023, arguing its resilient business model and growth potential remained underappreciated by investors.
However, the stock slumped in early March after management guided to a more ‘moderate’ level of growth in full year 2024, reflecting a more cautious view on the Americas in particular, before staging a rally driven by hopes it would sell its UK dealerships arm.
