Vertu Motors has bolted on four more Ford sites to its Bristol Street Motors portfolio with a takeover of Gordons (Bolton) Ltd.
The top 10 AM100 car dealer now has 22 dealerships representing Ford, and this acquisition has taken its operation to 114 sales and aftersales outlets across England and Scotland.
For an estimated £11 million cash, Vertu has acquired the trade and certain assets of two Ford main dealerships in Bolton and Wigan plus two satellite operations in Walkden and Horwich. The assets include four freehold properties valued at £6.9m, including a development site at Wigan for the construction of new premises.
The Gordons business has represented Ford in Lancashire for more than 100 years and employs 218 people.
For the year ended 31 December 2013, the management accounts of Gordons showed revenue of £76.7m and operating profit of £0.3m. Vertu said the dealerships are expected to be earnings neutral in the first full year of ownership and earnings enhancing in the 2016/17 financial year.
Robert Forrester, Vertu Motors chief executive, said: "The board is delighted to announce the acquisition of this well established business in Lancashire, which will provide further scale to the group's Bristol Street Motors Ford business.
"We are pleased to welcome over 200 new colleagues into the group who bring with them a wealth of experience in the Ford brand.
"This acquisition also brings with it some substantial freehold property assets which the group will actively manage to enhance shareholder value."
Mike Allen, director, equity research at Zeus Capital
"Vertu has made another acquisition, this time back to its roots of re-structuring and paying no goodwill. We would describe this as a freehold rich transaction with good scale benefits and strong site redevelopment potential.
"Given the timing of the transaction, we would expect this to be marginally EPS dilutive in 2015E, neutral in 2016E and EPS enhancing from 2017E under fairly conservative assumptions. We continue to believe the shares look undervalued given the earnings potential and progress delivered to date, and maintain our positive stance on the shares.
The acquired business generated £76.7m of revenues to December 2013 and operating profit of £0.3m, suggesting this business requires major restructuring.
"Total consideration is estimated at £11m and will be settled out of existing cash resources. There is no significant goodwill payable on this transaction, and the value of the four freehold sites is estimated to be £6.9m.
"Given the timing of the transaction (no peak trading in either March or September), we expect this to be marginally dilutive to 2015E EPS. However, we do think the business is well stocked and should see some working capital benefits for Vertu post deal.
"For 2016E we expect this to be EPS neutral (re-structuring and fleet mix), before becoming 3% EPS enhancing in 2017E. By 2018E, we would expect this business to be generating c£1.0m of adjusted PBT highlighting the long term value of this transaction."
David Kendrick, partner at UHY Hacker Young Automotive
"Gordon's of Bolton is a well established and respected North West dealer group and this acquisition is a great coup for Vertu who continue to add to their portfolio. In recent weeks we have seen two large Ford groups being acquired with hugely varying goodwill multiples which highlights the fact that every opportunity is valued differently.
"We are seeing increased activity with a number of businesses now looking at an exit as the consolidation continues. 2015 will see more consolidation and it will be interesting to see if the high valuations remain with certain business and franchises commanding large premiums. There are exciting times ahead and an opportunity for those who considered an exit back in 2008/09 to revisit and achieve an acceptable exit value."