Analysts and shareholders have given their backing to Halfords’ £73.2 million takeover of a Midland car servicing firm.
The Redditch-based firm has completed the acquisition of Olton company Nationwide Autocentres in a £73.2 million deal.
The move was welcomed in the City as Halfords shares rose almost 10 per cent in early trading after the announcement, which is set to create up to 1,000 new jobs.
Andrew Wade, an analyst at Numis Securities, said the deal represented “excellent use” of Halfords’ strong cash generation.
He added: “As well as providing another leg of growth to a solid core business, we see significant scope for cross-marketing and synergies.”
As a direct result of the acquisition, Mr Wade raised his forecast on 2011 pre-tax profits by £6 million to £130 million. He is looking for profits of £114.4 million in the current financial year.
After the deal, Nationwide’s 224 sites will be rebranded as Halfords Autocentres and it is expected that Halfords will roll out a further 200 centres.
Halfords said the rapid increase in demand for its in-store “we fit” services highlighted the opportunities in the car maintenance market.
Chief executive David Wild said: “Our expansion into the adjacent car servicing and repair market is an exciting and logical move for Halfords.
“Nationwide is a high quality business and represents an opportunity for significant growth.”
The largest UK provider of MoT and car servicing, Nationwide employs 900 mechanics and deals with around 500,000 customers a year. It has been owned by private equity fund Phoenix since 2006.
The current management team of chief executive Duncan Wilkes and chief operating officer Bill Duffy will remain in place following the acquisition.
Nationwide generated revenues of around £97 million last year, while underlying earnings are likely to be in the region of £10 million, up from £5.8 million a year earlier.
Halfords hopes to double earnings to £20 million in its third year of ownership, while it should also benefit from cross-marketing opportunities.
Matt Waddell, head of corporate finance at PricewaterhouseCoopers in the Midlands, who advised the vendors, said: “This is a highly significant deal involving two prominent Midlands businesses, which will boost the regional deal market and give heart to private equity investors.
“Nationwide Autocentres is a first class business that has grown significantly since Phoenix Equity Partners acquired it in 2006 and has firmly established itself as the leading independent car servicing and MOT specialist.
“The business represents an excellent fit with Halfords, and is well positioned for further strong growth under their ownership. The deal provides further evidence that buyers are ready and willing to act for high quality businesses with strong growth prospects.”