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Stock market: Relief as OFT allows deal

There was some relief last week when the Office of Fair Trading decided not to block the Inchcape acquisition of European Motor Holdings.

The share price is going through a golden phase and no-one wants the fun to end – least of all the board members who have just bought a substantial number of shares and share entitlements between them under the deferred bonus plan.

Andre Lacroix, the chief executive, has taken the biggest package of 50,000 shares. At today’s value, that is worth more than £287,000. The shares vest in three years’ time. Lacroix hit all his personal targets last year and was paid nearly £1.7m in salary, bonuses and benefits.

Over the last year, Inchcape shares have risen by 35% from £4.25 to £5.75. Lacroix spent that period researching a new strategy for the group, testing it, acquiring EMH and then picking carmaker partners as trading partners around the world.

The OFT was concerned that Inchcape combined with EMH group would have so many Volkswagen dealers (12% of the UK total) that the consumer would be adversely affected. The judgement says the principal concern was not the loss of competition in the sale of cars, but the loss in servicing, particularly for cars under warranty.

The OFT decided that 80% of a dealer’s service customers come from a 20-mile radius and found to its horror that in Oswestry and Wrexham there were VW dealers owned by Inchcape and EMH respectively.

“The OFT established a duty to refer the takeover…as this area gives rise to a two to one facia reduction in the supply of servicing and repair of nearly new cars.”

This clearly was going to be one of the biggest issues ever to confront the inhabitants of the Welsh Marches since Offa built his Dyke. Lacroix was quick to act.

“We will sell one of them,” he told the OFT. “OK then,” said the OFT.

And at the end of last week the merger reference was settled and the customary calm was restored to the Marches.

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