Vertu acquires Burrows Motor Company in £12.5m deal

The AIM-traded firm said the acquisition would strengthen its presence in Yorkshire and Nottinghamshire, with new locations in Barnsley, Doncaster, Rotherham, Sheffield, York, and Worksop, and deepen its relationships with key manufacturers Toyota, Mazda and Kia.

Following the transaction, Vertu said its Toyota dealerships would increase from six to 11, Mazda from two to four, and Kia from three to four.

The acquisition, funded from the company’s existing cash reserves and borrowing facilities, was in line with its growth strategy, with gearing remaining well below target levels.

It said the transaction was valued at £12.5m net of cash acquired, including £17.6m for freehold properties and £4m attributed to goodwill.

An additional £10.5m in Burrows’ debt would be assumed by Vertu, backed by property mortgages and vehicle stocking loans.

Vertu said it expected the acquisition to yield returns exceeding the cost of capital, with the deal anticipated to be earnings enhancing within the first full year of ownership.

For the year ended 31 December 2023, Burrows Motor Company reported revenue of £168.9m and an operating profit of £1.4m.

While Vertu expected Burrows to report a loss for the rest of the current financial year due to seasonal factors, the acquisition aligned with Vertu’s capital allocation policy aimed at maximising shareholder value.

All Burrows dealerships would be rebranded as Vertu and integrated into Vertu’s platform in the coming weeks.

“We have long admired the Burrows business and are delighted to have completed this acquisition creating further scale for the group with key manufacturer partners,” said chief executive officer Robert Forrester.

“The acquisition of Burrows gives us considerable scale in our partnership with Toyota and strengthens the Vertu brand in Yorkshire and Nottinghamshire.

“This is in line with our strategy to actively pursue value accretive growth opportunities to enhance our portfolio, applying strict investment return metrics as well as returning cash to shareholders.”

At 0837 GMT, shares in Vertu Motors were down 1.27% at 66.15p.

Reporting by Josh White for Sharecast.com.