Inchcape PLC (LSE:INCH) is to sell its UK retail operations to Group 1 Automotive UK, a wholly-owned subsidiary of Group 1 Automotive, for a cash consideration of approximately £346 million.
Larger rival AutoNation was initially tipped as a potential buyer.
The transaction forms part of the FTSE 250-listed car dealership's strategic pivot towards a global distribution-focused business model, enticed by higher margins and enhanced capital efficiency.
Inchcape’s board said today that it has “concluded it is the right time for a new owner to take this business forward”.
Duncan Tait, group chief executive of Inchcape, said: "As we continue to deliver on our strategic ambition of becoming the leading global distribution partner to our OEM partners worldwide, this transaction represents a significant step along that journey.
“Our UK retail business is a high-quality business, with an experienced and high-performing management team, and has been an important part of the group's growth.
“With our active international expansion into higher value distribution activities, the strategic importance of the UK retail operations has become limited.”
Daryl Kenningham, president and chief executive Group 1 Automotive, added: “With our considerable automotive retail experience in the United States and the UK, we look forward to building on Inchcape's strong industry relationships and leveraging our expertise to support our combined operations in their next phase of growth."
The UK retail operations to be sold generated over £2 billion in revenue in 2023, accounting for 18% of Inchcape’s total revenue, and employed approximately 3,600 staff across more than 80 locations in the UK.
Inchcape shareholders are expected to net £100 million through a share buyback programme funded by the disposal, with the remaining funds earmarked for future growth initiatives.
The deal is expected to close in the fourth quarter of 2024.