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Kwik-Fit sale: speculation grows

Speculation over the future of Kwik-Fit is growing rapidly as Ford prepares to sell off the Europe-wide fast fit chain it bought in 1999 for a reported $1.4bn. The manufacturer has appointed investment bank Goldman Sachs to handle the disposal of the 2400-strong network of garages and mobile units, but the world's second biggest carmaker wants Kwik-Fit sold intact.

“We believe Kwik-Fit is a great business with a great future and we do not want to break it up,” says a Ford spokesman. “We are selling Kwik-Fit as a going concern. We hope that someone will take it up and run with it.”

The announcement in February that Sir Tom Farmer was to stand down as the chairman and chief executive of Kwik-Fit fuelled speculation that a management buyout was on the cards. However, a number of venture capitalists such as CVC, Cinven and KKR have also been linked with Kwik-Fit. London-based Cinven grabbed headlines last year when it attempted to reinvest in the media business by snapping up one of France's largest publishing arms just months after selling magazine publisher IPC. And KKR had a highly successful involvement in the US vehicle aftermarket where it helped make AutoZone one of the nation's leading auto accessory shop chains.

What could make Kwik-Fit so attractive to buyers is the fact that it has plum sites in most UK cities and in key points across Ireland and Europe.

“If it is possible to get the necessary retail-based planning permission, then the sites will make Kwik-Fit very valuable,” says James Tanner, a property consultant with PrimePitch.

He believes the sites could be sold and then leased back, which would release capital to be used to build retail warehouses or distribution centres before selling them on. Tanner reckons that a venture capitalist could also buy the business and lease the sites back to the network to create regional franchises that would still trade under the Kwik-Fit name.

But Simon Hodson, Datamonitor senior automotive analyst, has not ruled out interest from a rival vehicle manufacturer. He has also suggested that a leading player in the US autocentre market, such as Penske Autocentres, could be in the running.

The automotive aftermarket sectors of Germany, France the UK and Italy had a combined worth of more than 50bn Euros at retail prices in 2001, excluding the crash repair business, according to Datamonitor. But the market is fragmented with more than 200,000 retail operators, ranging from franchised dealers to small independent garages.

Hodson says the current retail structure will be unsustainable and he expects to see a fundamental change in the configuration of the market over the next few years. “The key question is whether a Kwik-Fit that is independent of Ford will be able to take advantage of this change to build on its current two per cent aftermarket share,” says Hodson. Datamonitor believes Kwik-Fit could profit if its outlets become authorised repairers for franchised dealers - and its independence from Ford could help it to gain work from other manufacturers.

“Beyond the changes in block exemption a further factor encouraging the continued restructuring of the aftermarket is the generally low level of profitability in the sector,” says Hodson. “The value of the market is forecast to grow only slowly. In a slowly growing market, players will need to gain market share at the expense of other retailers if they are to grow significantly. “There may be an opportunity for Kwik-Fit to grow through acquisition in Europe and act as a consolidator - a role it has already played in the UK.”

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