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Arriva sells vehicle rental arm to Northgate

Northgate has announced the purchase of car and van rental firm Arriva Vehicle Rental for £129.3 million.

AVR operates through 33 branches in the UK in the light commercial vehicle, heavy commercial vehicle and car rental markets. It has a fleet of over 11,000 vehicles.

For the year ended December 31, 2004 (the last year for which audited accounts are available) AVR reported profit before interest, tax and amortisation of £12.5 million and at December 31, 2004 had gross assets of £167.8 million and net debt of £100.5 million.

The deal includes the entire issued share capital, plus properties used by AVR.

Northgate is placing 6,050,000 new ordinary shares of five pence each (representing approximately 9.4% of Northgate’s issued share capital) to fund payment of the consideration. Completion of the acquisition is expected to take place on February 3.

The deal will see £49.7 million paid in cash, plus Northgate will take over the repayment of approximately £106 million of net debt owed by AVR and its subsidiaries to external banks and will receive £30.6 million from Arriva as settlement of debt.

The net amount payable of £129.3 million will be satisfied through placing 6,050,000 new ordinary shares in Northgate, with the balance payable in cash.

Northgate said in a statement today: "The acquisition of AVR builds on Northgate’s existing position of leadership in the UK market, in line with Northgate’s strategic plan, and will create a light commercial vehicle fleet, once integrated, in excess of 62,000 vehicles, while at the same time providing wider coverage of the UK market."

Arriva said it had sold AVR to focus on the passenger services market in the UK and Europe. Arriva will use the proceeds to repay debt and strengthen its balance sheet as the group continues to look for acquisitions and franchise opportunities.

Bob Davies, chief executive, said: "The sale of Arriva Vehicle Rental is at the right price and the right time. It enables us to focus even more strongly on developing our passenger services businesses."

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