MAJOR international automotive distributor and retailer, Inchcape plc, has sold its UK-based retail business as it consolidates into a distribution-focused company.

It has sold its 54 UK sites to US-based retail business Group 1 Automotive for £346 million ($A662.3m) with the deal expected to be complete by the third quarter. Inchcape Retail employs 2500 people in the UK.

Inchcape’s UK dealership portfolio includes Audi, BMW/Mini, Jaguar Land Rover, Lexus, Mercedes-Benz, Smart, Porsche, Toyota, Volkswagen and Volkswagen Commercial Vehicles.  

On an aggregate basis, these dealerships sell more than 63,500 new and used vehicles, and 24,000 corporate units, annually.

The addition of Inchcape’s 54 sites takes Group 1’s UK’s dealership portfolio to 109 outlets, and its total annual revenues of more than £4 billion ($A7.7b) will mean it overtakes Marshall Motor Group to enter the top 5 of the AM100. 

The UK sale does not affect Inchcape’s automotive interests in other markets, including Australia.

Inchcape plc group chief executive Duncan Tait said: “This sale represents a good outcome for all stakeholders and is an important step in realising our ambition of being the leading distributor for our partners and customers worldwide.”

Duncan Tait

Distribution will now account for 99 per cent of Inchcape’s global revenue and operating profit. The sale of the group’s UK retail operations follows a strategic review announced on January 29, 2024. 

The company said at the time that accelerating Inchcape’s transformation into a substantially distribution-focused business “will generate higher returns, make the company more capital-light, relatively higher margin and highly cash generative.”

“Retail still has a place in Inchcape as part of its distribution value chain, where it adds commercial value, to drive deeper market understanding and customer insights in certain markets,” it said in its stock exchange announcement.

“But the group remains focused on harnessing the capabilities of a differentiated distribution platform for OEM partners – combining unrivalled technology, powerful local expertise, and exceptional people.”

Behind the exit from retail was rumours that Inchcape was cautious about the future in sales given the growth of agency-style retailing.

Inchcape UK chief executive George Ashford said: “Group 1’s acquisition of Inchcape’s UK retail operations demonstrates our business’s impressive scale, strategic footprint, and strong relationships with OEM (Original Equipment Manufacturer) brands.

“This success is due to our people, our teams, and the excellent work they have put into building a business known for its outstanding customer service.

“Group 1 clearly shares our vision for excellence and growth and has demonstrated its commitment to the long-term success of our business and will be a great home for our colleagues.”

Group 1 Automotive president and CEO Daryl Kenningham 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.”

After US-based Group 1 bought its first UK businesses in 2007 at the south of England, it has steadily expanded northwards into East Anglia and the Home Counties, however the Inchcape acquisition expands its territory into Wales, the Midlands and the North West of England.

And its chief executive, Mr Kenningham, said in an interview with AM Online that he wants to drive the combined operations into their next phase of growth.

Daryl Kenningham

“Inchcape’s brand mix is outstanding,” he said.

“These new stores complement our geographic footprint in the East and South East of England and enable us to expand into new markets in the Central and North West regions of England and Wales. 

“Inchcape’s exceptional reputation has been built over 50 years in the retail business.  We look forward to welcoming our new team mates to the Group 1 family.”

The £346m ($A662.3m) all-cash transaction includes £220m ($A421m) of property assets. 

Group 1 chief financial officer Daniel McHenry, who was finance director of its UK operation from 2007 until taking his current global role in 2020, said: “While this transaction provides a transformation in scale for our company in the UK, our US credit facility pro-forma leverage ratio will be approximately 2.2-times after taking into account the financing of this transaction with debt and cash on hand, and liquidity remains comfortably within our targets.

“This gives us the flexibility to continue shareholder-focused capital allocation, which includes accretive acquisitions, share repurchases, dividends, and return-driven capital expenditures.”

It is Group 1’s biggest acquisition in the UK since it took over nine-dealership group Robinsons in East Anglia during 2021.

It’s not the only deal Group 1 has done with Inchcape. In 2013 it acquired Inchcape’s Ford dealership division.

By Neil Dowling

AdTorque Edge