LONDON, UK: Inchcape Plc 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) for a cash consideration of approximately £346 million.

In FY2023, Inchcape’s UK Retail operations generated revenue of £2,065m, 18% of Group revenue, and adjusted operating profit of £49m, 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.

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.

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 Inchape 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.”

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