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Inchcape delves further into Russian market

Inchcape has bought a 71.5% stake in Musa Motors Group, a top 10 dealer in Russia, for £100.3 million.

Talks for the deal started back in February. Musa's portfolio of brands includes BMW, Mini, Jaguar, Land Rover, Volvo, Chrysler, Jeep, Dodge, Rolls-Royce and Renault at 16 franchised dealerships. The sites are primarily located in and around Moscow, except the Roll-Royce site which is in St Petersburg.

Inchcape will pay an additional amount for the stake in Musa based on its performance this year and expects the deal to be earnings enhancing before the end of 2008.

Inchcape's share price dropped by 8.75p or 2.2% in reaction to the announcement of the deal.

Completion of the acquisition is subject to approval of regulatory authorities in Russia and is expected to occur in the second half of this year.

Over the next three years, Musa Motors expects to open a further four retail centres in Moscow for existing and new OEM partners and relocate four retail centres to larger new facilities. This will result in Inchcape having 21 retail centres in Moscow, which includes Inchcape's joint venture with Independence Group, and its majority shares in Audi and Peugeot dealerships in St Petersburg. It also owns dealerships in Latvia and Lithuania.

Musa Motors is headquartered in Moscow and has operated in Russia since 1992.

During 2007, Musa Motors sold 13,281 cars. In the first quarter of 2008, Musa Motors sold 3,222 cars, a 52.8% increase over the same period in 2007.

Musa Motors operational management team will remain with the business. Its operations trade under the brands Borishof (BMW, MINI and Rolls-Royce) and Musa Motors.

Andre Lacroix, group chief executive of Inchcape, said: "This is a significant step in the development of our operations in Russia, giving us the opportunity to operate a scale business in this fast growing market, with many of our key OEM brand partners.

"This acquisition positions Inchcape with one of the best and most modern networks of premium brands in Moscow, and we expect our combined revenues in Russia to reach £1 billion in 2009.

“The group retains significant capacity to make further acquisitions in international markets."

In the year ended December 31, 2007, Musa Motors' turnover was $597.4 million (£297.4m).

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