Inchcape sells UK retail operations to Group 1

Inchcape has agreed to sell its UK Retail operations to Group 1 Automotive UK, a wholly-owned subsidiary of Group 1 Automotive, for a cash consideration of approximately £346m.

The transaction, expected to complete during Q3, is a part of Inchcape’s strategic decision to focus on its higher margin, capital-light, high returns, cash generative global Distribution business.

Duncan Tait, group chief executive of Inchcape, said: “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.”

Since 2016, Inchcape has divested c.£2.4 billion of retail revenue. Following the transaction, Inchcape’s distribution activities will account for more than 99% of its global revenue and operating profit.

Technology-enabled distribution solutions are being used by OEMs to develop their brands. Inchcape’s distribution platform demonstrates advanced digital and data capabilities, global presence, local insights and customer-centric innovation.

Of the proceeds £100m will be returned to shareholders via a share buyback programme, lasting 12 months. The remaining proceeds will be used for organic investment and value-accretive acquisitions.

The automotive sector continues to share reactions to the news.

Steve Young, MD at ICDP, commented: “No surprise that Inchcape agreed a sale as UK retail didn’t fit with their distribution focused strategy. Interesting though that Group 1 has emerged as the winner. Again unsurprising that they decided to scale up their existing UK business, but it seemed that Autonation might decide to join Penske, Lithia and Group 1 in the UK market.

“Having missed out this time, will they set their sights on Vertu, the last remaining listed group in the UK and one of the best operators?”