Strategic distribution acquisition in central America

Transaction highlights:

Compelling strategic rationale:

• Suzuki-led Distribution business in Costa Rica and Panama with a strong management team
• Establishes a scale platform in attractive markets, adjacent to recent South American expansion
• Expansion of Suzuki partnership in a strategically important region for Suzuki where the brand is particularly well positioned
• Increases Inchcape’s presence in markets with structural growth potential
• Further evidence of continued delivery of Ignite strategy and Inchcape’s ability to leverage our unique position in a highly-fragmented industry

Strong financial rationale:

• Accretive to earnings in first full year post-acquisition by mid-single digit percentage
• Enhances Group operating margin
• High cash flow generation, typical of a Distribution business
• Funded from existing cash and committed debt facilities; Group retains strong balance sheet

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OEM partner of choice:

With more than 45 years of experience, Grupo Rudelman is a successful and high-quality Automotive Distribution business in the structurally attractive markets of Costa Rica and Panama. In both markets, Suzuki and Grupo Rudelman have built a top 5 market position and in 2017, Grupo Rudelman distributed approximately 12,500 new Suzuki vehicles.

Suzuki has a broad customer appeal driven by desirable, competitively-priced models defined by Japanese quality. Suzuki’s model line-up, led by SUVs and small-engine compact cars, is particularly well suited to local market preferences in Costa Rica and Panama, and the brand’s product pipeline is attractive.

Grupo Rudelman also represents a number of emerging brand partners as Distributor and exclusive Retailer, including JAC and Changan in both Costa Rica and Panama, BAIC and Kubota in Costa Rica, and Great Wall in Panama.

Inchcape already has a long-term partnership with Suzuki, who the Group has represented as Distributor in Singapore since 1977. Following our acquisition in South America in 2016, Inchcape also represents Suzuki as Distributor in Argentina.

Investing to Accelerate Growth:

The Costa Rican and Panamanian markets both present structural growth opportunities given their low vehicle penetration rates and economic growth expectations. We see significant benefits to the business by combining the local strength of Grupo Rudelman’s platform and team with Inchcape’s global experience, capabilities and resources, which will all be available to support and drive the development of the acquired business.

In addition, this acquisition creates an even more meaningful platform for Inchcape in Latin America, enhancing our ability to drive further long-term growth across the region.

This acquisition is a further demonstration of the success of Inchcape’s Ignite strategy and marks our sixth Distribution acquisition in the last 24 months. The acquisition of these Distribution businesses further increases the contribution of this attractive channel to Group profitability and actively positions Inchcape for higher growth and cash generation.

Further details:

The transaction involves the acquisition of the Grupo Rudelman group of companies from their shareholders including Holding de las Americas S.A. and Fundacion Rudco.

The transaction is unconditional and is expected to be completed later today.

In light of the acquisition, Inchcape no longer intends to continue with the share repurchase programme which was announced on February 27^th 2018. The Board will however continue to evaluate its appropriate capital allocation over time.

Stefan Bomhard, group CEO of Inchcape plc, commented:

“The acquisition of a second scale Distribution platform in Latin America in two years highlights our commitment to investing for growth and allocating capital in a disciplined manner.

We are acquiring a strong, well-managed business and I am very pleased to welcome the Grupo Rudelman team to Inchcape. I am delighted to significantly enhance our relationship with Suzuki, a brand that is well positioned for growth and success in emerging markets, with whom we are proud to have partnered for over 40 years.

With this acquisition we continue to actively position Inchcape towards higher growth markets and higher return Distribution businesses. Distribution trading profit, on a pro forma basis, now equates to 81% of total Group profit in 2017. In addition, Inchcape’s portfolio and presence in Latin America has been significantly strengthened, and I am excited about the future opportunities this presents.”

Notes

¹ Reference to Inchcape plc includes all of its worldwide subsidiaries

² GBP:US Dollar exchange rate of 1.41524

³ The consideration represents approximately 9.6x EBIT of $29.4 million and approximately 9.1x EBITDA of $31.2 million for the 12 months to 31^st December 2017 based on unaudited consolidated financial information on Grupo Rudelman’s combined Costa Rica and Panama operating entities

Certain information included herein, such as financial estimates, projections and forecasts, contains forward-looking statements which involve risk and uncertainty, such as business, economic and regulatory changes, which could cause actual results to differ materially from such estimates, projections and forecasts. No representation or warranty is given as to the achievement or reasonableness of any forward-looking statements discussed in this document. This document is delivered as at the date specified.