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Speculation on Caffyns as Inchcape expands in south

Inchcape is expanding its power base with BMW in the south-east after reaching agreement to acquire dealerships in Cobham, Surrey and Wimbledon from William Jacks. The territories adjoin Inchcape's BMW franchise in Thames Ditton.

The announcement came as Inchcape's share price soared past the £10 barrier amid rumours in the national media that the company might be on the verge of bidding for south coast dealer Caffyns. Inchcape told AM it did not comment on such speculation.

The acquisition of the BMW and Mini businesses is yet to be approved by William Jacks shareholders at a meeting on July 31 – but Inchcape says the deal will be worth £6.2m. Additional charges will be paid for stock, fixed assets and creditors at completion.

Inchcape sold its BMW and Mini dealership in London's South Bank to BMW GB at the end of June as part of the manufacturer's network restructuring. It will retain ownership of the premises until March 2004, with BMW leasing the property.

There's little doubt the new acquisitions are a major boost to the company's retail portfolio. The William Jacks dealerships in Surrey and Wimbledon are in key markets for BMW, and will help consolidate Inchcape as one of the top dealer groups in the country.

With a turnover figure of £929m in this year's AM100, Inchcape could be the next group to achieve annual sales of £1bn – alongside the current members of that exclusive automotive club, Pendragon, Reg Vardy, Jardine Motors, CD Bramall and Arnold Clark.

“Many car manufacturers are moving towards larger scale relationships with fewer retail partners, following the changes to European block exemption legislation,” says Peter Johnson, group chief executive of Inchcape. “These BMW transactions are part of our UK strategy to develop large continuous territories with our key OEM partners, and further announcements can be expected.”

An acquisition of Caffyns would add another 29 dealerships to Inchcape's current 75-site network, and an extra turnover of £160m. But an Inchcape spokeswoman tells AM: “We are often linked to takeover speculation, partly because we have a strong cashpot, and have achieved many different areas of consolidation.

“We think the rise in our share price recently is because the City is rewarding us for a strong performance expanding into larger, continuous territories. We want to grow with a series of bolt-on acquisitions, which is exactly why we are so pleased with the new BMW dealerships in such key territories.”

The sale will leave William Jacks with one BMW dealership, although it retains franchises for Chrysler, Honda, Jaguar, Land Rover, MG Rover, and Volvo. This year it was at number 36 in the AM100 listing.

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