Report Links Marubeni with £650 million Kwik-Fit Sale

Just over a month after the news that Kwik-Fit owners PAI had appointed Credit Suisse to analyse the options for the sale of the company, newspaper reports have linked Japanese trading house Marubeni with a possible purchase. Marubeni’s other UK interests include ownership of Yokohama HPT tyres and a network of 24 car showrooms through its Marubeni Automotive Ltd subsidiary. It is also said to own one of the largest dealers for Toyota and Mazda in Europe.

Despite the reports, a company spokesperson told Tyres & Accessories that Kwik-Fit is “not in advanced discussions with anyone, specifically not Marubeni.” Rather the reported sale of the company is said to be in the very early stages, with the timeframe to completion unclear at this time.

The press report’s linkage of Marubeni as a possible buyer follows earlier unconfirmed suggestions that the sale process was initiated by the receipt of two bids. Tyre manufacturers Bridgestone, which previously unsuccessfully bid for Kwik-Fit in 2005 and Michelin, which owns the next largest tyre retail chain ATS Euromaster, have also been linked with the bidding. However, T&A understands that potential suitors from both the tyre world and private equity are signalling interest. A purchase by Michelin-owned ATS Euromaster, which recently embarking on significant reorganisation of its branch structure would seem unlikely due to the risk of cannibalisation that any merger or acquisition would bring, not to mention the monopolies commission hurdles that would inevitably have to be overcome.

Whatever the identity of the bidders and whoever eventually succeeds in buying the company the reported £650 million pricetag for the company touted by the papers is said to be a roughly accurate description of where the bidding is going, sources close to the negotiations told T&A. And numerically they would have to be for the sale to make economic sense. PAI reportedly paid £800 million for Kwik-Fit in 2005 and recently sold the business’s insurance arm to Belgium’s Ageas, the new name for Fortis, for £215 million. A sale of retail business for much less than the £600 million mark would therefore result in PAI making a loss on its initial investment.

The report in the Sunday Times published 21 November 2010, also said that Kwik-Fit’s underlying profits fell 1.5 per cent to £98.4 million last year as “higher costs squeezed margins on its fixed-price fleet-car contracts” – a sector in Kwik-Fit dominates the UK passenger car tyre market.

Related News:

• PAI Partners Confirms it is considering £650 million Sale of Kwik-Fit

• Kwik-Fit For Sale for £250 million?

• Kwik-Fit Sells Insurance Business for £215 million