Group 1 Automotive expands with large acquisition of Inchcape UK dealerships

Group 1 Automotive has agreed a £346 million deal to acquire Inchcape's UK dealerships, almost doubling the scale of the AM100 group.

The addition of Inchcape's 54 sites takes Group 1 Automotive UK's dealership portfolio up to 109 outlets, and its total annual revenues of more than £4 billion will mean it overtakes Marshall Motor Group to enter the top 5 of the AM100.

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 this acquisition expands its territory into Wales, the Midlands and the North West of England.

And its chief executive Daryl Kenningham wants to drive the combined operations into their next phase of growth.

Inchcape revealed in January that it had put its UK dealer group, Inchcape Retail, under a strategic review as it continued to refocus on expanding its global vehicle distribution operations, rather than retailing.

The dealer group has a workforce of more than 2,500 people, who had been waiting to hear their fate.

Announcing the sale, Inchcape chief executive Duncan Tait said the disposal of the dealerships "represents a significant step" for his group.

"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."

Distribution will now account for 99% of Inchcape's global revenue and operating profit.

He said nevertheless that the Inchcape Retail is a high-quality business, with an experienced and high-performing management team, and it had been an important part of Inchcape's growth over time.

“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.”

Group 1's president and chief executive Daryl Kenningham (pictured) said he was "extremely pleased to have this opportunity to grow" in the UK dealer market.

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.

"Inchcape's brand mix is outstanding. 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."

Kenningham added: "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."

The £346m ($439m) all-cash transaction includes £220m 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 2.2x 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. 

George Ashford, who heads the UK operation of Inchcape, thanked colleagues for their contribution to making the dealer group a success. He added: "I'm confident we'll continue to excel as part of Group 1, who are well positioned to drive further growth."