24th Apr 2008 07:01
Inchcape PLC24 April 2008 INCHCAPE EXPANDS FURTHER IN HIGH GROWTH RUSSIAN MARKET Highlights • Acquisition of Musa Motors Group, one of Russia's largest car retailing groups, based in Moscow • Provides Inchcape with a significant scale position in Moscow with 16 sites with key global OEM brand partners • Earnings enhancing in 2008 • Complements existing Russian operations and provides platform for further growth • 2009 combined Russian revenue expected to reach £1bn. • Delivering on our Emerging Markets strategy Summary Inchcape plc ("Inchcape" or the "Group"), the world's leading car retailer,today announces its acquisition of an initial 75.1 per cent. shareholding inMusa Motors Group ("Musa Motors Group" or "Musa Motors"), a top ten car retailerin Russia and a top 3 retailer of premium brands with a strong customer focus.Its portfolio includes BMW, MINI, Jaguar, Land Rover, Volvo, Chrysler, Jeep,Dodge, Rolls-Royce and Renault. The initial consideration is $200.0m (£100.3m)for 75.1 per cent., with additional potential consideration payable based onMusa Motors performance in 2008, which will be funded from the Group's existingfinancial resources. This transaction, once completed, will significantlyincrease the scale of Inchcape's Russian operations and provide a strongplatform for the Group's growth strategy in Russia. Musa Motors Group Musa Motors is headquartered in Moscow and has operated in Russia since 1992.During 2007, Musa Motors sold 13,281 cars. In the first quarter of 2008, MusaMotors sold 3,222 cars, a 52.8 per cent. increase over the same period in 2007. Musa Motors is one of a limited number of scale operators in Russia focused onpremium brands. It operates 16 franchised retail centres for the followingbrands: BMW, MINI, Jaguar, Land Rover, Volvo, Chrysler, Jeep, Dodge, Rolls-Royceand Renault. These retail centres are primarily located in Moscow and thesurrounding Moscow region, together with a Rolls-Royce showroom in StPetersburg. Over the next three years, Musa Motors expects to open a further 4retail centres in Moscow for existing and new OEM partners and relocate 4 retailcentres to larger new facilities. This will result in Inchcape having 21 retailcentres in Moscow, which includes Inchcape's existing joint venture agreementwith the Independence Group of Companies to retail Toyota. Inchcape and Musa Motor's management team will drive forward the planneddevelopments of new retail centres and build further on Musa Motors' successfuloperations. Musa Motors has an experienced operational management team who willremain with the business. Its operations trade under the brands Borishof (BMW,MINI and Rolls-Royce) and Musa Motors (other brands). The retail centres providea full range of services, including retail of new and used cars, aftersales andsales of finance and insurance products. In line with Inchcape's strategy of building a scale position in Russia, theacquisition significantly increases its presence in Moscow and provides aplatform from which the Group expects to expand into the regions outside StPetersburg and Moscow. Russia's car market is the largest in Central and EasternEurope and is experiencing rapid growth. According to Avtostat, brands sold byMusa Motors experienced average growth of 50 per cent. in the year ended 31December 2007. Musa Motors financial record and expected financial effects for Inchcape In the year ended 31 December 2007, Musa Motors' turnover and EBIT were $597.4million (£297.4m) and $23.1 million (£11.5m), respectively (see note 1). Inchcape expects that the transaction will be earnings enhancing (before one-offcosts and amortisation of goodwill on intangible assets) in the year ending 31December 2008 and thereafter. The acquisition is expected to satisfy the Group'sinternal rate of return criteria for its investments in emerging markets (seeNote 3). Summary terms of the acquisition agreement The consideration for Inchcape's 75.1 per cent. shareholding will be based on anenterprise value calculated as a multiple of audited EBIT for the year ending 31December 2008. A down payment of $200.0m (£100.3m) will be made upon completionof the transaction, with the balance of the consideration (net of any debtwithin Musa Motors) due on completion of the audit of Musa Motors' 2008accounts. The total consideration for the acquisition of the 75.1 per centshareholding is subject to a cap of US$450.0m (£225.7m). Completion of theacquisition is subject to approval of regulatory authorities in Russia and isexpected to occur in the second half of 2008. Inchcape will acquire theremaining 24.9 per cent. shareholding based on an enterprise value calculated asa multiple of audited EBIT for the year ending 31 December 2010, followingcompletion of the audit of Musa Motors' 2010 accounts. The acquisition of theremaining 24.9 per cent shareholding is subject to a cap of US$250.0m (£125.4m).All consideration payable by Inchcape will be in cash and funded from theGroup's existing financial resources. Dresdner Kleinwort advised Inchcape on this transaction. Troika Dialog advisedthe selling shareholders of Musa Motors Group. Andre Lacroix, Group Chief Executive of Inchcape, commented:"This is a significant step in the development of our operations in Russia,giving us the opportunity to operate a scale business in this fast growingmarket, with many of our key OEM brand partners. This acquisition positionsInchcape with one of the best and most modern networks of premium brands inMoscow, and we expect our combined revenues in Russia to reach £1bn in 2009. The transaction, which is in-line with our strategy of expansion in EmergingMarkets, together with our existing businesses in St Petersburg, provides uswith a strong springboard for regional roll-out in Russia. We will leverage ourstrong local management and market understanding, our global OEM relationshipsand our unique global retail model. The Group retains significant capacity to make further acquisitions ininternational markets." For further information, please contact:Group Communications, Inchcape plc+44 (0) 20 7546 0022 Investor Relations, Inchcape plc+44 (0) 20 7546 8432 Financial Dynamics (Jonathon Brill/Billy Clegg)+44 (0) 20 7831 3113 NOTES TO EDITORS Inchcape plc Inchcape plc is the leading independent, international automotive retailer, withscale operations in Australia, Belgium, Greece, Hong Kong, Singapore and the UK.The Group also has operations in a number of other markets, including EasternEurope, the Baltics, China, Russia and South America. In addition to growing itscore businesses, Inchcape is looking to develop scale operations in new andemerging regions. It represents leading automotive brands and operates either aretail, or a vertically integrated retail model (i.e. exclusive distribution andretail), depending on the market. Inchcape's current key manufacturer partnersare Toyota/Lexus, Subaru, BMW, Mazda, Mercedes-Benz, Volkswagen, Audi and Honda. For further information, visit us at www.inchcape.com 1. In the year ended 31 December 2007, the Musa Motors Group had unaudited turnover of US$597.4m (£297.4m), earnings before interest and tax (EBIT) of US$23.1m (£11.5m) and profit before tax of US$20.8m (£10.3m). As at 31 December 2007, the Musa Motors Group had unaudited gross assets of US$138.7m (£69.8m). This financial information has been extracted from the Musa Motors Group management accounts and adjusted for certain non-recurring and normalisation items. 2. Under the agreed terms of the acquisition, a new company will be established, 75.1 per cent. owned by Inchcape, to acquire the Russian companies comprising Musa Motors Group from their existing shareholders Broadzone Ltd, Bradholm Networks Ltd, Harnley Experts Ltd and Brightport Merchants Ltd. 3. This statement should not be taken to mean that future earnings per share of Inchcape following the acquisition will necessarily match or exceed historic earnings per share and no forecast is intended or implied. 4. Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations, and by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. The information does not assume any responsibility or obligation to update publicly or revise any of the forward-looking statements contained herein. Dresdner Kleinwort Limited, which is authorised and regulated by the FinancialServices Authority, is acting for Inchcape and for no-one else in connectionwith the transaction and will not be responsible to anyone other than Inchcapefor providing the protections afforded to clients of Dresdner Kleinwort Limitednor for affording advice in relation to the transaction or any other matterreferred to in this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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