NORTHERN Ireland's largest motor dealers, Charles Hurst, carries a £25 million sterling price tag in the agreed takeover by Lookers, the Manchester based car firm where Woodchester holds a 29.1 per cent stake. The price takes out the Hurst business on a multiple of nearly 11 times 1996 earnings, a bargain for Lookers compared with recent deals in the British motor, trade where companies have been changing hands on 15 or 17 times earnings.
Lookers is funding the takeover through a £10 million one for three rights issue at 125p a share underwritten by Samuel Montagu, a £10 million medium term loan and a £5 million issue of shares to Hurst vendors.
Woodchester will be taking up its right entitlement, costing nearly £3 million, and will bed subscribing a further £1.4 million for new shares at a 15 per cent, premium to the rights price to maintain its equity stake in the enlarged business at 26.6 per, scent. Also, Woodchester will pay £3.35 million to buy the Hurst's, hire purchase business, Adelaide Finance, from Lookers after the takeover.
Lookers directors believe the Woodchester connection will bring additional revenue for Hurst, replicating the financial benefits enjoyed by the group's British activities since the Irish financial group took its 29.1 percent stake nine years ago.
Acquisition of Hurst will increase the size of the Lookers business by nearly 50 per cent, lifting annual turnover to nearly £600 million with the potential to earn annual profits above £10 million. Last year, Lookers suffered a £600,000 sterling decline in profits to £6.4 million after a £400,000 exceptional closure charge on barely changed turnover of £399 million. Total dividend payments are up 5.3 per cent.
Hurst's last figures for 1995 showed a £550,000 increase in profits to £2.8 million despite £350,000 investment write offs and £700,000 costs, mainly comprising directors' salaries, pension and profit sharing costs as well as head office costs not expected to continue under the Lookers ownership.
Lookers chairman Mr Ken Martindale said talks on the get together followed a conversation with Hurst's managing director Mr Fred Macquire, and it was clinched by the desire of Hurst's mature owners to find a secure home for the Northern Ireland car business as they approach retirement.
Mr Macquire is to stay on as Hurst's managing director. The Hurst acquisition meets the Lookers strategy of increasing the geographical and franchise spread of its dealership network, said Mr Martindale.
Founded in 1911, the business is the largest retailer of motor vehicles in Northern Ireland with a 13.8 per cent share of the market - selling Nissan, Renault, Rover Citroen and Sangyong cars in the volume markets. Franchises in the specialist car market are held for Jaguar, Rolls Royce, Ferrari, Aston Martin and Land Rover, and the group has an important share of the motorcycle and accessories market.
Mr Martindale emphasised that one of Hurst's key strengths is its development of "village" retailing format, notably the cluster of 10 dealerships representing all oft its franchises on a single site at Boucher Road, Belfast. "We think this form of village retailing is the way of things to come in the motor trade," said Mr Martindale. "It provides an opportunity for on the spot comparative shopping and is a highly successful form of motor selling. One or two motor dealers have tried to develop this style of selling in Britain. But it has not really been successful so far, mainly because they have beef located on small sites with only two or three different franchises.
Although the Hurst retailing format may be replicated by Lookers in Britain, financial documents outlining the acquisition emphasise Lookers "has no intention of operating a volume franchise in the Republic of Ireland".
The car market in the Republic in very different from Northern Ireland, being mainly the preserve of small scale dealers, explained Mr Martindale.
Any entry by Hurst into the cat market in the Republic would be damaging for car dealers and disturb their relationships with Woodchester.
