Northgate Regulatory News (NTG)

5 Jul 2005 07:01

Northgate PLC05 July 2005 5 July 2005 NORTHGATE PLC ACQUISITION OF RECORD RENT A CAR S.A. ("Record Rent" or the "Company") Introduction Northgate plc ("Northgate"), the UK's leading specialist in light commercialvehicle hire announces that it has agreed to acquire the entire issued sharecapital of Record Rent, one of the largest van rental companies in Spain, for amaximum cash consideration of €140m (£95m), subject to Record Rent's profitafter tax in the current financial year. Information on Record Rent Record Rent, founded in 1966, is one of the leading Spanish vehicle rentalproviders. The Company operates throughout Spain in the medium to long-termindustrial vehicle rental market. It has 16 depots, a fleet of over 18,000vehicles, and is focused on corporate clients, currently having more than 2,300corporate customers. The Company is 55% owned by funds managed by Mercapital, a Spanish privateequity house, 43% by the Martinez family and 2% by other shareholders. TheChairman of the Company is Jorge Martinez and the Managing Director is FernandoPermartin who joined the Company in 2000. Northgate intends to retain theexisting management and operate the Record Rent brand separately from itsexisting Spanish brand: Fualsa. Northgate's enlarged Spanish operation still has considerable developmentpotential due to the expected growth in the Spanish vehicle rental market andthe increasing trend towards commercial vehicle rental rather than ownership(c.2% rental penetration compared to c.10% in the UK). For the year ended 31 December 2004, Record Rent generated sales of €81.6m(£55.3m) and profits after tax of €11m (£7.5m). These results include a profiton disposal of a property of €2.3m before tax. At 31 December 2004, RecordRent's net assets were €74.6m (£50.6m). Terms of the acquisition The acquisition will be completed in two stages. Northgate will initiallyacquire 49% of the issued share capital of Record Rent for a cash considerationof €54.8m (£37.2m) funded from Northgate's existing available bank facilities.This stage of the acquisition is conditional on the approval of the Spanishcompetition authorities and the demerger of Record Go, a subsidiary involvedsolely in the provision of cars to the vacation market, both of which areexpected to complete in approximately four weeks' time. Northgate will acquire the remaining 51% of the issued share capital of RecordRent for a cash consideration not exceeding €85.2m (£57.8m) comprising a fixedpayment of €61.2m (£41.5m) and an additional amount equal to the profit aftertax of Record Rent for the year ending 31 December 2005 up to a maximum of €24m(£16.3m). This stage of the acquisition will complete following the approval ofRecord Rent's accounts for the year ending 31 December 2005, expected to takeplace in May 2006. Northgate and the vendors have entered into a shareholders' agreement providingfor the operation of Record Rent in the period up to completion of the secondstage of the acquisition. As part of the agreement Northgate will appoint threeof its representatives to serve as Directors of Record Rent. Financial effects of the acquisition The Directors of Northgate anticipate that the acquisition will be earningsenhancing with immediate effect. Current trading Northgate's preliminary results for the year ended 30 April 2005 have beenannounced today. In the Chairman's statement accompanying these results, thefollowing commentary on current trading is made: "Since the end of the year we have experienced a weaker vehicle residual marketin the UK than in the prior financial year. In Spain, meanwhile, our fleetgrowth rates are higher than those planned." "Despite the softer residual market and perceived weaknesses in the UK economy,the Board remains of the opinion that we should achieve further progress towardsour planned objectives in both the UK and Spain during the forthcoming year." Commenting on the acquisition of Record Rent, Martin Ballinger, Chairman ofNorthgate plc, said "We are delighted to be announcing a further significant expansion of Northgatein the Spanish market. In its first full year under Northgate ownership, Spanishsubsidiary Fualsa's result has confirmed our belief in the exceptionalopportunity afforded by the vehicle rental market in Spain." "The acquisition of Record Rent, an equally successful business, will enable usto deliver a better and more cost-effective service to both sets of customers.We look forward to working with the respective management teams in developing aresponsive, flexible enterprise throughout Spain and its territories." - Ends - For further information, please contact: Northgate plc 01325 467558Steve Smith, Chief ExecutiveGerard Murray, Finance Director Hogarth Partnership Limited 020 7357 9477Andrew JaquesBarnaby Fry This information is provided by RNS The company news service from the London Stock Exchange