Car dealer Inchcape expects to complete Derco acquisition by the end of 2022 as Peru’s authorities give the greenlight
- Derco sells a vast array of car brands, including Suzuki, Mazda and Chevrolet
- The firm was founded in 1959 and is almost wholly-owned by the Del Rio family
- Inchcape believes the Americas are an attractive destination to pursue growth
Inchcape is set to finalise its takeover of Derco by the start of next year after receiving approval from Peruvian authorities.
The car dealership chain has agreed to spend £1.3billion to gain control of Latin America’s biggest independent motor distributor, whose market share across the countries where it operates is close to 20 per cent.
Approval for the acquisition has already been given by Chilean and Colombian regulators and the company’s shareholders, who favourably voted in overwhelming numbers during a general meeting last week.
Acquisition: Car dealership chain Inchcape has agreed to spend £1.3billion to gain control of Derco, Latin America’s biggest independent motor distributor
Inchcape said on Friday that it had now secured the green light from authorities in Peru, thereby passing the final regulatory hurdle, and expects to close the deal sometime later this month.
The London-based firm has argued that the Americas are an attractive destination to pursue growth, due to low motor ownership levels, favourable demographics, and anticipations of solid per capita GDP growth.
It predicts the transaction will deliver a minimum of £40million in annualised synergies and be more than 20 per cent accretive to its earnings per share from the second year following the acquisition.
The news came as figures from the SMMT showed an increase in new car production in the UK, although it remains about 35 per cent pre-pandemic levels.
Duncan Tait, the chief executive of Inchcape, remarked: ‘The combination with Derco is a transformative and unique opportunity to accelerate our global distribution business.
‘In addition to delivering substantial shareholder value, the acquisition will provide exciting opportunities for our colleagues, OEM partners, dealers and consumers, and is another great example of Inchcape’s Accelerate strategy in action.’
Founded in 1959 and almost wholly-owned by the Del Rio family, Derco operates more than 375 outlets across South America, selling a vast array of automobile brands ranging from Suzuki to Mazda, Chevrolet and Citroen.
For the 2021 financial year, the company generated £2billion in revenue and scored an operating profit of £236million, having experienced a downturn in trade over the previous two years.
Business was severely affected by the imposition of onerous travel restrictions in the wake of the coronavirus pandemic, as well as geopolitical volatility across the region.
Inchcape’s operations were similarly impacted by lockdown restrictions before it saw a phenomenal rebound in orders as pent-up demand was released and consumers with extra savings sought to upgrade their motors.
Trading further benefited from a global shortage of semiconductors forcing producers to cut back on vehicle production, thereby driving up the prices, and margins, of both new and secondhand cars.
Despite the worsening global economic backdrop, orders have continued to grow this year, including by 16 per cent in the three months ending September.
When reporting its third-quarter results in October, the group said it expected adjusted pre-tax profits would be either towards the top end or slightly higher than its previous guidance of £350million to £370million.
Inchcape shares were 0.5 per cent lower at 815p during the mid-morning on Friday, but have only fallen by around 10 per cent in value so far this year.