Redde Northgate plc (LON:REDD), the integrated mobility solutions and automotive services provider, has announced the acquisition, by a wholly owned subsidiary, of certain businesses and certain assets of Nationwide Accident Repair Services by way of a purchase from administrators, for an initial cash consideration of up to £11m, plus a deferred consideration of up to £5m conditional on retention of certain trade business on satisfactory terms.
The Group also provides a brief update on trading ahead of the preliminary announcement scheduled for 16 September 2020.
Since our pre-close trading update of 19 May 2020, and as restrictions relating to Covid-19 have eased, the Group has seen sequential monthly improvements in trading, such that the level of support packages provided to customers has now reduced to a minimal level, vehicles on hire have increased in all countries, accident and incident volumes have started to increase as traffic volumes pick up, and vehicle disposal channels have re-opened, with recent significant improvement in residual values compared to the prior year. Further, excellent progress has continued to be made in integrating Redde and Northgate since the merger.
Given the improving trading environment and the continued close management of liquidity, cash inflows have been strong and the headroom on our bank facilities has increased from £234m at the end of April 2020 to £291m at the end of August 2020.
Nationwide is the UK’s largest wholly owned repair network and the largest independent accident repair company in Europe. It is a strategic partner to many UK insurers, with whom, in several cases, Redde Northgate has existing relationships. Of the current 102 bodyshop sites, we will take up to 77 sites, providing the Group with national geographic coverage. Of these sites, there are a small number of freehold properties, and the remaining leasehold properties will be occupied under licence granted by the administrators and we will make a determination in due course whether to take leases on these sites based on whether we achieve satisfactory lease terms. The acquisition will see approximately £17m of gross assets, including a fleet of mobile repair vans to service customers in their location, as well as approximately 2,300 of Nationwide staff, transfer to the purchasing subsidiary.
The acquisition is expected to be earnings enhancing in the first full year of ownership as well as delivering a post-tax return on invested capital comfortably in excess of the Group’s weighted average cost of capital.
The acquisition, which will be funded from existing facilities, further reinforces the strength of Redde Northgate’s proposition, extending the Group’s existing capabilities in Service, Maintenance and Repair services. Before this transaction, in the UK, Redde Northgate did not have in-house capability for repairs, but has long considered building capability in the UK as the Group already successfully runs repair centres in Spain. This transaction offers the Group the opportunity to deliver on that goal quickly, with a strong team, well located sites and an existing flow of business, utilising surplus repair capacity with its own volumes.
Commenting on the acquisition, Martin Ward, CEO of Redde Northgate, said
“At the time of the Redde Northgate merger, we set out our vision to become the leading integrated mobility solutions provider. This acquisition, our first post-merger, is in line with that vision and significantly increases our strategic and operational capability to support a wider number of business partners requiring automotive repairs. We expect this acquisition will open up new markets to the Group, and in combination with an established pipeline of repair work from existing Group companies, such as FMG, it is well placed to maximise future opportunities.
We welcome those Nationwide colleagues who will be joining the Redde Northgate Group and we look forward to creating new value and service offerings for all our stakeholders.”