The 300p-per-share offer has been unanimously accepted by Dixon directors, and will give RBS an impressive combination of automotive retail and financial services businesses.
The bank - which will acquire Dixon through its Lombard North Central division - is already a leading motor finance player, and dominates the direct motor insurance market through Direct Line.
Dixon and Direct Line are already close allies through their Jamjar internet sales joint venture, and Dixon supplies cars to Lombard for its fleet leasing and contract hire businesses.
“We believe the acquisition of Dixon is a logical extension for Lombard as one of the leaders in the business finance marketplace,” says Lombard managing director Chris Sullivan. “The addition of Dixon to our vehicle management and financing operations will give us a new platform from which to grow.”
Earlier this year an RBS source said an operation like Jamjar could only operate as part of the current system with a separate dealer supplier. But he warned that with this arrangement there was always the potential for that supply of cars to be cut off. “This gives us an unacceptable degree of uncertainty,” the source claimed. This deal removes that uncertainty.
RBS parent Lombard has received irrevocable undertakings or letters of intent to accept its offer from shareholders representing just under 60 per cent of Dixon's share capital. The shares will be delisted within 20 days, says Lombard.
Paul Dixon believes the Royal Bank of Scotland's financial muscle will enable Dixon Motors to strengthen its ties with key franchise partners such as PSA, Nissan, Renault and MG Rover.
Dixon, who becomes group chairman with his son Simon promoted to chief executive, says funding is “critical” to be a successful car retailer in today's business environment.
“This move gives us the security to do whatever our franchise partners want of us,” he adds.
“We will have access to financial resources that we have never had before - but we will still need to show that we can get the necessary returns on any investment.”
Dixon intends to expand the £850m turnover group within its geographical heartland, “putting on weight” in Yorkshire, Humberside, Lincolnshire and Nottinghamshire. He also predicts a move into Leicestershire, but claims to have no intention of acquiring groups elsewhere.
“I have no plans to be a consolidator - there have been no examples in the industry where this approach has worked,” he says.
At the heart of the £109.7m acquisition - through RBS's Lombard division - is Dixon's vehicle preparation and distribution centre in Thorne, near Doncaster. The centre will be expanded to handle and defleet Lombard's finance, contract hire and leasing operations.
“Cost will be taken out of the supply and defleet process which will benefit customers. It will also free up resources,” says Dixon.
“It offers Lombard the perfect opportunity to lift service levels at its business to business operations, which is not one of our major strengths, while we develop our retail focus.”
The centre helped Dixon's aftersales operations to increase profits by £3m last year by absorbing pre-delivery inspections on new/used vehicles. This released spare workshop capacity.
One of the industry's success stories over the past decade, Dixon Motors sold 71,548 new cars last year. Pre-tax profits reached £12.1m in 2001 - a rise of 55 per cent. The company runs 94 car and motorcycle dealerships employing 3650 staff in addition to the Thorne vehicle preparation and distribution centre.
Dixon's Jamjar joint venture with RBS subsidiary Direct Line has proven a successful foray into internet retailing. Jamjar sold around 6000 cars last year, and took 1100 orders in January 2002 alone.
News of a mystery bidder for Yorkshire-based Dixon spread rapidly through the motor trade.Some speculators suggested Inchcape or Reg Vardy plc were moving to further consolidate their operations; others believed US dealer giant AutoNation was about to follow Roger Penske's United Auto Group into the UK retailing sector.
Login to comment
Comments
No comments have been made yet.