Inchcape to acquire automotive distributor Derco for £1.3 bn

Inchcape to acquire automotive distributor Derco

LONDON, UK: Inchcape Plc, the independent multi-brand global automotive distributor, signed an agreement to implement a business combination to acquire Derco Holdings, the largest independent automotive distributor in Latin America, for a cash and share consideration valuing Derco at £1.3 billion.

Derco is a family-owned multi-brand automotive distributor, and the largest independent distributor by volume in Latin America, with a strong track record of profitable growth. For FY 2021, Derco reported revenue of £2.0 billion and operating profit of £236 million, a bourse filing noted.

Derco has significant presence across four attractive markets of Chile, Peru, Colombia and Bolivia, and has long-standing partnerships with global automotive brands such as Suzuki, Mazda, Chevrolet, Changan, JAC, Renault, Great Wall and Haval.

Derco is led by an experienced management team with deep knowledge of the markets in which they operate, and on average 15 years of experience. This team will be a strong addition to Inchcape’s fast-growing platform in the Americas.

STRATEGIC HIGHLIGHTS

· Brings together two leading automotive distributors in Latin America: Inchcape, with broad geographic reach and extensive brand representation, and Derco, the largest independent distributor by volume

· Significantly expands Inchcape’s position in highly attractive and fast growth markets within Latin America

· Combines two best-in-class operators with complementary market footprints and OEM brand portfolios, providing significant opportunities for customers, OEMs and employees of the enlarged business

· Expected to deliver significant value creation through enhanced growth prospects and delivery of meaningful recurring synergies

· Derco is a well-managed company, strongly aligned culturally and strategically with Inchcape. The Del Río family (Derco’s ultimate owners) will become a shareholder (9.3% stake) in Inchcape and will be entitled to nominate one director to the Inchcape Board following Completion

Duncan Tait, Chief Executive Officer, Inchcape, commented: “The combination with Derco is a transformative and unique opportunity to accelerate our global distribution business. We believe it will deliver substantial shareholder value and is another great example of our Accelerate strategy in action.

Derco will dramatically increase our scale in the fast growth Americas region, bolstering our presence in several existing markets, and will secure Bolivia as a new Inchcape distribution market. Derco also brings a fantastic set of highly complementary OEM relationships, including deepening our decades-long relationship with Suzuki, and broadens our brand footprint in the region, with Mazda, Chevrolet, Changan, JAC, Renault, Great Wall, Haval, Citroen, DS and Joylong.

We have long admired Derco’s business, and we are delighted to partner with the Del Río family. We are also excited about working with our talented new colleagues at Derco to continue to accelerate the growth of the enlarged Americas business. Together we will have extensive access to customer and vehicle data, which is at the heart of our strategy to capture a greater share of the vehicle lifecycle value.

As the leading independent automotive distributor globally, Inchcape will continue to drive sector consolidation in an industry primarily made up of regional and more local distributors and where the combination of digital capabilities, and data and consumer insights are ever more valuable.”

Romeo Lacerda, CEO Americas and Africa, Inchcape, commented: “Derco is a great business with strong and long-established relationships with leading OEMs. It has a reputation for operational excellence and has been successful in expanding its distribution footprint in recent years.

Growing demand for new vehicles in Derco’s highly attractive markets is underpinned by compelling long-term demographic and economic trends in Chile, Peru, Colombia, and Bolivia. These powerful market dynamics provide a long run-way of growth opportunities for our business.

Inchcape’s scale and geographic diversification together with its track record for successful integration, engaging and retaining talent and market-leading digital and data capabilities provide a strong platform for continued profitable growth and superior value creation.

I am really looking forward to welcoming our new colleagues from Derco into Inchcape Americas.”

Juan Pablo Del Río, Shareholder and member of the Board of Derco, added: “Inchcape’s track record of expansion across the Americas is impressive, and we have great respect for the business. Both companies enjoy a strong strategic and cultural fit, sharing the same values and commitment to deliver excellence for our OEM partners and consumers across our communities.

As well as its established reputation for distribution excellence, Inchcape is the undisputed leader in digital and data for automotive distribution across the Americas. This is an increasing area of focus for automotive OEMs, and is one of the reasons they are so supportive of our proposed combination.

I am excited by the combination with Inchcape, and the opportunities we have to further accelerate the growth in the Americas region, together with the continued support of our colleagues.”

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