Kwik-Fit Sells Insurance Business for £215 million
Kwik-Fit Group Limited has announced that it has agreed to sell its UK Insurance business (KFIS) to Fortis UK Limited for £215 million, a division of Belgium-based Ageas. The transaction is subject to the usual regulatory approval, but is expected to be completed in the third quarter of 2010. According to the company, the transaction marks the successful completion of a strategic review for the KFIS business announced in February 2010.
Proceeds from the sale will be used to repay debt which, together with funds injected into the business as part of the recently completed covenant reset exercise at the end of 2009, will reduce net bank debt to £486 million. In an official statement on the matter, company representatives said the move leaves the business “in a strong position to exploit growth opportunities in its core fast-fit businesses.” It will also go some way towards halting speculation that the company’s private equity owners (PAI) are looking to sell the entire business as the rumours themselves appear to have been based on the size of Kwik-Fit’s debts.
The Kwik-Fit Group, excluding KFIS, achieved sales of £364 million in the first five months of 2010, representing growth of 5.9 per cent compared to the same period in 2009. Adjusting for the effect of foreign exchange rates and trading days, like-for-like retail sales grew by 6.1 per cent, with strong performances in all of the Group’s businesses. EBITDA, excluding KFIS, for the first five months of 2010 was £29.3 million, 17.7 per cent ahead of 2009.
Profitability driven by MOT capabilities
Kwik-Fit reports that it has continued to expand its businesses by investing in new products in order to diversify its offering to customers. Initiatives implemented in 2010 include: Continued expansion of MOT capacity in the UK, bringing total capacity to 510 MOT centres (76 per cent of the total); Expansion of servicing to a further 19 UK centres, bringing total capacity to 596 Servicing centres (89 per cent of total); Opening of five new centres in the UK as part of an ongoing core estate expansion programme, with a further eight centres due to open in the remainder of the year.
In addition, Kwik-Fit representatives reports that the company has increased its expansion of glass repair/replacement offering in continental Europe and further developed its fleet offering in continental Europe “through growth in market share.”
Ian Fraser, chief executive of Kwik-Fit commented: “The sale of the UK Insurance business at an attractive price enables the group to reduce debt significantly and to invest further in our core fast-fit business. As we expand the services and products we offer, Kwik-Fit is playing an increasingly important part in keeping our customers motoring safely and at an affordable price.”
In its statement publicising the signing of an agreement with PAI Partners to acquire KFIS, Ageas SA reported that the move was “another important step in the execution of the successful multi-channel, multi-brand distribution strategy of Ageas in the UK” following on from the company’s partnership with Tesco Bank last year.
Announcing the transaction, Bart De Smet, CEO of Ageas said: “I welcome this acquisition on its strategic and financial merits and as a next step in the execution of our strategy announced last autumn. It broadens our base and will accelerate the growth of our business in the UK, one of our core insurance markets and one that is frequently at the forefront of new developments in the insurance sector. I am confident too that this transaction will accelerate value creation for all stakeholders.”
Barry Smith CEO of Fortis UK added: “The purchase of Kwik-Fit is part of Ageas’s strategy in the UK to increase the breadth and depth of our product offering through a multi-channel distribution approach. The complementary strengths of Ageas and Kwik-Fit will create an exciting retail business focused on customer needs whilst generating a greater return for our company.”
KFIS is an insurance intermediary, which sells predominantly personal line insurance products direct to customers, primarily through the internet, leveraging the Kwik-Fit brand and two other brands owned by KFIS – The Green Insurance Company and Express Insurance.
The Kwik-Fit Group (of which KFIS was a part) runs 1,800 car and tyre service outlets across Europe and employs 9,000 people. Established in 1971, Kwik-Fit has national UK coverage of 596 servicing centres and more than 200 mobile tyre fitting vehicles.