Lookers lets go of parts division in £120m deal

Lookers announced on Wednesday that it has entered into a conditional agreement to sell its parts business to Alliance Automotive, on a debt free and cash free basis, for a consideration of £120m payable in cash on completion.

The FTSE 250 firm’s parts division is a distributor of automotive parts which includes brands such as BTN Turbo, FPS and Apec Braking.

Alliance Automotive is part of Alliance Automotive Group, a major European distributor of automotive and commercial vehicle parts to the automotive aftermarket.

The transaction is expected to complete by the end of October.

“In the year to 31 December 2015, Parts generated sales of £218.8m and underlying operating profit of £12.6m and as at 31 December 2015, Parts had gross assets of £155.7m,” Lookers’ board said in a statement.

Lookers’ board said it believes the transaction will enable the group to create greater value for its shareholders, with its intention for proceeds to also be used to pursue acquisitions in the motor division over the short and medium term.

“Given the current low level of interest rates available on cash deposits, the sale of the Parts business will be earnings dilutive to the group until the capital can be successfully redeployed via acquisitions in the motor division,” the board explained.

“However, the group has a strong track record of delivering successful acquisitions in recent years and the board is confident of acquiring further businesses into the motor division in the short term.”

The board said it is in advanced stages of negotiation on the acquisitions of two premium-branded car dealership businesses, which it hopes to announce shortly.

Managing director of parts, Neil Davis, will remain with the division as it transfers to Alliance.

“I am pleased to announce this conditional agreement which the board believes is in the best interest of shareholders,” said Lookers CEO Andy Bruce.

“The offer from Alliance Automotive is an attractive one and will enable us to focus on what we do best - buying and selling cars, and adding value through acquisitions.”

Bruce reiterated the company is already at advanced stages of negotiation on the acquisitions of two premium-branded car dealership businesses and hope to make further announcements on these in the coming weeks.

“I would also like to thank our colleagues in our Parts Division for their contribution to the wider Lookers business."