# Marshall Motor Holdings Plc To sell Marshall Leasing Limited

- Link: https://www.directorstalkinterviews.com/marshall-motor-holdings-plc-sell-marshall-leasing-limited/412735826
- Published: 2017-09-21T07:38:19+01:00
- Author: Giles Arbor

**Marshall Motor Holdings plc**, ([LON:MMH](https://www.directorstalkinterviews.com/company/marshall-motor-holdings/mmh.l))
one of the UK’s leading automotive retail groups, announced today the proposed strategic
disposal (“Disposal”) of its wholly-owned leasing segment, Marshall Leasing Limited(“
MLL” or “Marshall Leasing”) to N.I.I.B Group Limited (which trades as ‘Northridge
Finance’), a wholly owned subsidiary of Bank of Ireland (UK) plc (“Bank of Ireland”)
for a gross cash consideration of £42.5m. The Disposal is conditional upon Bank 
of Ireland receiving regulatory approval from the Financial Conduct Authority (“
FCA”) to acquire MLL.

**Highlights**

· The Disposal will allow MMH to focus on its core motor retail business and to 
continue the Group’s successful strategy of driving both organic growth and increasing
its UK geographic footprint through targeted acquisitions with existing brand partners.

· The net cash proceeds of the Disposal will initially be used to reduce existing
levels of indebtedness. The Group’s reported net debt at 30 June 2017 was £101.1m.
As a result of the Disposal, the Group’s pro forma 30 June 2017 balance sheet would
have been un-geared with net cash of approximately £4.6m.

· The Disposal will further strengthen the Group’s balance sheet. As a result of
the Disposal, pro forma net assets at 30 June 2017 would have been approximately
£196.7m, equivalent to 254p per share (actual net assets at 30 June 2017: £158.0m,
equivalent to 204p per share).

· The MMH board believes the Disposal provides an opportunity to create greater 
long term value for its shareholders.

**Rationale**

Marshall Leasing is a nationally recognised and well regarded independent automotive
leasing and fleet management provider for UK corporates and has been part of the
Group since it was established in 1979. It is considered by the Board to be a quality
business that has performed well over recent years.

The leasing and fleet management market continues to consolidate and the Board considers
that scale is becoming increasingly important to underpin the capital intensive 
nature of the business model. Eight of the top ten UK motor leasing businesses are
owned by financial institutions or vehicle manufacturers. The Board therefore believes
that the future growth of Marshall Leasing is better supported under different ownership
and is pleased to have agreed a sale of MLL to Bank of Ireland.

After completion of the Disposal, the Group will be focused exclusively on its UK
motor retail operations, a segment which the Board believes continues to offer attractive
opportunities for future growth.

Since its IPO in April 2015, the Group’s retail segment has continued to show significant
growth in both revenue and profitability. This has been underpinned by strong organic
growth and contributions from the strategic acquisition of SG Smith and Ridgeway.
The Group has an excellent track record of acquiring and integrating motor retail
businesses. Carefully targeted acquisitions remain a core part of MMH’s strategy,
specifically to grow with existing brand partners in new geographic territories 
and to generate an attractive return on the invested capital.

MMH aims to deliver class leading returns for its shareholders as a result of the
Group’s focus on retailing excellence, strategic growth, customer service and people
centricity. The Board believes the Group remains well positioned in what is still
a consolidating market and continues to seek to drive further growth in its profitability
and return on capital, supported by a balanced portfolio of brands, attractive geographic
locations and excellent brand partner relationships.

**Financial effects**

The Disposal is expected to be dilutive to underlying earnings per share in the 
year ending 31 December 2017 although there will be a significant gain on disposal.
In the year ended 31 December 2016, MLL generated total revenue of £39.3m, an underlying
profit before tax of £4.9m and profit after tax of £3.7m. In the six months ended
30 June 2017, MLL generated an underlying profit before tax of £2.4m (H1 16: £2.7m).

As at 30 June 2017, MLL had gross assets of £95.0m and net assets of £19.8m. Prior
to completion of the Disposal, MLL will have repaid certain intra-group loans/liabilities
and will have declared and paid an intra-group dividend such that the net assets
of MLL at 30 June 2017 would have been approximately £1.1m.

As at 30 June 2017, the Group’s reported net debt was £101.1m. The net proceeds 
of the Disposal will initially be used to reduce existing indebtedness and the Disposal
will also remove Marshall Leasing’s vehicle financing obligations from the Group.
If the Disposal had been completed on 30 June 2017, MMH would have had pro forma
net assets at that date of approximately £196.7m (equivalent to 254p per share) 
and pro forma net cash of approximately £4.6m.

**Terms of the Disposal**

MMH has agreed to sell MLL to Bank of Ireland, subject only to approval of the transaction
by the FCA. The gross cash consideration of £42.5m will be due on completion. The
sale agreement contains customary warranties and indemnities given by MMH in respect
of MLL, subject to certain customary limitations. Completion is expected to occur
before 31 December 2017.

Management believes that the valuation achieved is reflective of MLL’s scalable 
platform, strong management team and differentiated, service-led offering.

On completion, Bank of Ireland will enter into a brand licensing arrangement with
Marshall of Cambridge (Holdings) Limited (“MCH”) for a maximum of five years. The
agreement provides for the continued use of Marshall trade marks for a one-off consideration
of £0.5m.

In addition, on completion, MMH will enter into a transitional services arrangement
to enable the smooth integration of MLL into Bank of Ireland and an agreement for
the supply of new vehicles by MMH to MLL.

Completion of the Disposal will trigger a section 75 settlement liability in respect
of the Group’s defined benefit pension scheme, payment of which will release MLL
from all historic pension liabilities under those arrangements. This liability is
expected to be approximately £1.0m and will be settled by MLL post-completion. An
element of the Consideration will therefore be retained pending final determination
and settlement of this liability.

MMH has incurred transaction costs of approximately £1.7m including certain MLL 
management incentives and the discharge of certain MLL long term incentive arrangements.

> **Daksh Gupta, Marshall Motor Holdings Plc Chief Executive Officer commented:**“
> The strategic disposal of our leasing business is an important step for MMH. It
> further strengthens our financial position and allows us to remain focused on 
> driving our core retail operations. In a changing and consolidating retail landscape,
> we see various exciting opportunities ahead which, with the support of our brand
> partners, we are now even better positioned to exploit.
> “MLL has been an important part of our Group for many years. On behalf of the 
> Board I would like to thank all my leasing colleagues for their significant support
> and contribution over this period and wish them well for the exciting times ahead
> under new ownership.”

Share on: