Gateshead-based Vertu Motors plc said on Monday it acquired 12 BMW and Mini showrooms in York, Sunderland, Teesside, Durham and Malton from The Cooper Group Limited, part of Inchcape plc, for about £18.7 million.

Vertu Motors also published a trading update showing its performance “has remained ahead of prior year and original budget levels.”

Vertu has a network of 146 sales outlets across the UK.

Vertu Motors CEO Robert Forrester said: “We are delighted to announce the introduction of the much sought after BMW, MINI and Motorrad franchises to the group, previously a gap in our portfolio of manufacturer partners.  

“The addition of these franchises has long been a strategic objective of the group. 

“The acquisition achieves immediate scale in a region where the Group is headquartered and already has strong representation.

“The business has previously performed at a high level and it is our intention to ensure that it returns to this previous success delivering both for customers and financially.  

“As the group enters its 15th year of trading, this acquisition reflects a further milestone in both its scale and maturity.”  

Vertu said it now represents 32 franchises in the UK, more than any other UK automotive retailer. 

Graeme Grieve, CEO for BMW Group UK and Ireland, said: “Vertu has been working with BMW Group over a number of years as a potential partner and we are delighted to be able to bring their professionalism and energy into our retailer network.  

“We very much look forward to working closely with Vertu, to ensure customers in the North East and Yorkshire have an excellent customer experience with our brands and gain from the substantial investment we have made in electric powertrains as the UK accelerates its transition to zero carbon in new vehicles.”

On the acquisition, Vertu said: “The business was acquired from The Cooper Group Limited, part of Inchcape plc for total cash consideration of £18.7m (subject to finalising completion accounts) together with the assumption of manufacturer used vehicle stocking finance of £8.9m.

“The assets acquired include £16m of freehold and long leasehold properties and a payment in respect of goodwill of £0.8m.

“The cash consideration has been funded with a combination of a new £12.76m 20-year mortgage facility from BMW Financial Services, secured on the acquired freehold and long leasehold dealership properties at a fixed interest rate of 2.9% for the first 5 years, and a payment from the group’s existing cash resources.

“For the year ended 31 December 2019, the business achieved revenues of £305m and a loss before tax of £6.0m.  

“The group has a clear plan to drive performance improvements over a three-year period. 

“A new management team, with significant BMW and MINI franchise experience, has been hired and will be integrated with existing, experienced Vertu operational management. 

“The group’s systems and processes are being implemented immediately to facilitate business improvements in the areas of customer experience and financial performance. 

“The businesses will be branded Vertu reflecting the continued growth of the Vertu brand in Premium franchises in the UK, supported by the increasingly successful website, vertumotors.com.

“The acquisition is expected to be at least earnings neutral by the year ending 28 February 2023 (FY23) as the benefit of synergies, common systems and processes and integration activities drive financial performance, and is anticipated to be substantially earnings enhancing thereafter. 

“The incremental return on invested capital is anticipated to exceed cost of capital from FY24.

“The acquisition has been undertaken with the full support of the manufacturers. 

“Both BMW and MINI are extremely well positioned to take advantage of the electrification of the automotive market in the UK over the next decade.”

In its trading update, Vertu said: “For the financial year to date (being the nine months ended 30 November 2020) the group is now trading approximately 15% above last year at an adjusted PBT level, despite the impact of the further national lockdown in England from 5 November to 2 December on vehicle sales.

“Overall profit performance has benefited significantly from the continued business rates holiday on showrooms, grants claimed for colleagues furloughed and the impact of cost savings from the previously announced cost reduction programme. 

“It remains uncertain as to whether trading performance for the remainder of the financial year will continue at the level seen year to date, particularly given the potential impact on trading of further COVID-19 restrictions and the impact of Brexit from 1 January 2021.  

“Following the announcement of the acquisition above, losses are anticipated to arise in the acquired business in the remaining three months of the financial year.”