Lookers to sell parts division in £120m deal and focus on sales

MOTORING group Lookers is to dispose of its car parts division as the business focuses on selling cars in a deal that has been welcomed by the City.

Lookers, one of the largest car dealer groups in the country, said it had agreed a conditional sale of its parts division to Alliance Automotive in a £120m cash deal.

Andy Bruce, the chief executive, said: “The board believes this condi- tional deal is in the best interest of shareholders. The offer from Alliance Automotive is an attractive one and will enable us to focus on what we do best; buying and selling cars, and adding value through acquisitions.”

He said the company was already in “advanced negotiations” about buying two upmarket car dealership businesses to add to Looker’s current estate of more than 150 outlets.

In the year to the end of December, the parts division was responsible for £219m of Lookers’ £3.65bn total revenues, and £12.6m of the £85.9m underlying profits, making it one of the highest margin parts of the group.

Announcing the planned deal, Lookers warned that “given the current low level of interest rates available on cash deposits, the sale will be earnings-dilutive until the capital can be successfully redeployed via acquisitions in the motor division”.

However, the company said it was “confident” of successful acquisitions to make up the shortfall.

Head of the parts division, Neil Davis, will remain with the business, and no longer be a director at Lookers when the deal completes.

The sale is a class one transaction and will require shareholder approval, as well as EU merger control clearance. If these are met, it is expected to complete by the end of October.

Analysts at Numis called the scheme a “sensible strategic disposal for a solid price”.