SYDNEY, AUSTRALIA: RPM Automotive Group has entered into a binding agreement to acquire the inventory and assets of Metro Tyre Services (Metro) for total consideration of $4.5 million.

Total purchase price of $4.5m (100% cash), implying an acquisition multiple of 3.9x FY22 EBITDA pre-synergies, including $200K in inventory, $2.6m to be paid on settlement (60%) and two annual instalments of $860K (20% each), subject to EBITDA earn-out requirements, in March 2024 and March 2025.

Chief Executive Officer of RPM Automotive Group Limited, Clive Finkelstein, said: “We are very pleased to announce the strategically important acquisition of Metro at attractive acquisition metrics. This acquisition will expand our national footprint, increase our product range and enhance our customer value proposition.

In addition, the debt refinance and equity raise will ensure that our business is fully funded to execute on our organic growth plans moving forward. We are very confident in the outlook for the consolidated business in FY23 and beyond as we leverage crosssell opportunities, realise synergies and expand margins across our vertically integrated business model.”

Metro Tyre Services is a full-service tyre dealer, providing 24/7 onsite mobile tyre fitting repairs and servicing, specialising in earthmoving, forklift and commercial tyre sales, fitting, service and repairs. Metro is based in Penrith, NSW and generated revenue of $10m and EBITDA of $1.15m in FY22.

The strategic acquisition of Metro Tyre Services assists RPM Automotive in expanding its geographic footprint in NSW and increases points of presence to 40 Australia wide. Whilst providing additional scale, the Acquisition will improve RPM’s retail offering through the expansion of the product range and will increase pull through from RPM’s new wholesale warehouse in Prestons, Sydney.

In addition to improving the customer value proposition, the Acquisition will drive more competitive pricing, enhance supply chain efficiencies and provide further national service capabilities for fleet operators.

The Acquisition is aligned with RPM’s core M&A strategy and will aid in enhancing the Company’s vertically integrated business model, leading to further margin expansion.

RPM expects FY23 revenue to be in the range of $125m – $130m and FY23 EBITDA to be in the range of $12m – $13m, on a consolidated basis. Revenue and earnings in 2H FY23 are both expected to be stronger than the first half, with seasonally higher revenue in Q2 and Q3.

RPM is now focused on inventory management, and inventory turns are forecast to gradually increase from 2.3x in FY22 to 4x in FY24. In 2H FY23, it is expected that there will be a positive impact on working capital and operating cash flow, as inventory typically peaks in Q2 and declined through the second half.