Inchcape Retail has paid £28m to buy five Mercedes-Benz dealerships from the privately-owned Southwell Motor Company and its subsidiary, Leadley Ltd. The purchase means Inchcape now operates eight Mercedes outlets from an area stretching across the West and East Midlands, and as far south as Oxford.

The combined turnover of its Mercedes division has more than doubled to more than £200m, which places the group in an M-B superleague alongside Pendragon and Sytner. Initially, the eight outlets are expected to sell 2,700 new Mercedes a year, with an additional 1,800 used models.

Inchcape Retail, eighth in June’s AM100 with sales totalling £990m, will become another £1bn-plus turnover group in the next listing.

“This deal is directly in line with our strategy of building scale with a number of core manufacturing partners,” says Graeme Potts, Inchcape UK and Europe managing director. “We have the largest contiguous territory in the UK for Mercedes-Benz and Smart, generating significant scale and offering us excellent business synergies.”

DaimlerChrysler was closely involved with the negotiations and encouraged Southwell/Leadley to sell. DaimlerChrysler Retail, fourth in the latest AM100 with a £1.237m turnover, wants to control the sale of most Mercedes cars in the UK through its own outlets and those of a major groups such as Inchcape.

The announcement, timed to coincide with Inchcape’s pre-close trading statement, is likely to boost the group’s standing in the City. Last month, analysts were told trading levels were slightly higher than forecast and profits were expected to rise, driven by the retail division.

Inchcape Retail, with Mercedes dealerships in Oxford, Coventry and Stratford-upon-Avon, had for some time been looking for an opportunity to expand. To this network it has added Southwell’s Mercedes outlets in Derby, Nottingham and Leicester (all also with Smart), plus Loughborough and Mansfield.

Jeff Leadley, who has more than 30 years motor trade experience, and Paul Rigby joined forces to build the group. In December 2002, they paid £3.4m to buy the Loughborough Mercedes dealership.

Potts has appointed Rigby brand director of Inchcape’s Mercedes interests. With the acquisition, Inchcape Retail adds almost 300 people to its workforce.