Investors have given the green light to motor accessories group Halfords’ £73.2m acquisition of Nationwide Autocentres and are confident of the deal’s merits.
Amber lights had flashed following speculation Halfords might buy arts and crafts specialist HobbyCraft. The City feared Halfords could be in danger of replicating a conglomerate structure such as that of ill-fated Ward White, of which Halfords was once part under Boots’ ownership.
But the purchase of Nationwide Autocentres, which has 224 outlets and offers services such as MOTs and repairs, was welcomed and is seen as complementary to Halfords.
Although Halfords had run a servicing business during the Ward White era, and exited it, the retailer’s management and City analysts are convinced that the tie-up with Nationwide Autocentres - which will be rebranded Halfords Autocentres - makes sense.
Broker UBS said: “In Nationwide Autocentres, Halfords has acquired a leading business already at scale. We are comforted by the retention of existing management and do not expect history to repeat itself.”
Execution Noble maintained: “There is execution risk but our work on the motor retailers and the dynamics of the used car market cross-references well with Halfords’ rationale for the deal. Nationwide Autocentres is a high margin, needs-driven business in a fragmented market, ripe for consolidation by those with the strongest balance sheets.”
Oriel said: “Nationwide Autocentres is the only scale, national business in the industry but commands less than 1% market share. Halfords has spotted an opportunity to rebrand and lend its scale to a business that had decent growth prospects anyway.”
Halfords finance director Nick Wharton said the intention is to double Nationwide Autocentres’ operating profit within three years. He dismissed any comparison with the service centres run during the Ward White days and fears of Halfords becoming a sprawling conglomerate.
“The difference is we’re buying an established, high-quality business with the right cost profile and we’re going to apply a better brand,” said Wharton.
“The Halfords brand is very much about automotive and leisure and we are very precious about stewarding that brand for the long term.”
Halfords funded the acquisition out of existing resources and intends to open at least 200 more autocentres over the coming years to grab share in a market estimated to be worth £9bn. Nationwide Autocentres’ existing management will remain at the business.