This story first appeared in the August issue of AutoTalkau CLICK HERE to download the magazine FREE
ASX listed RPM Automotive Group (ASX:RPM) continues its growth through acquisition strategy as it purchases another two complementary businesses and also opens a new distribution centre in Far North Queensland (FNQ).
RPM Automotive Group says the strategy is consistent with its recent acquisitions Elite Tyre Group, Super Tyre Mart and East Coast Tyre Wholesalers.
The group has acquired Carline Automotive – Cairns, Carline Automotive and Revolution Racegear – Townsville and leased a new warehouse.
The businesses were integrated into RPM’s performance and accessories division, on August 1 2021, while the FNQ warehouse expands RPM’s distribution footprint.
RPM chief executive Clive Finkelstein says providing a seamless customer experience serviced by our specialist staff across all our integrated brands is key to the success of RPM Automotive Group.
“The recent acquisitions of Carline Automotive – Cairns and Carline Automotive and Revolution Racegear – Townsville are examples of our next expansion phase, purchasing some of our franchisees and members as part of our forward integration plan,” Finkelstein says.
“While opening the RPM Autoparts Townsville distribution centre enable us to improve our store supply capability in Far North Queensland. Our new warehousing facility is fully equipped to support our vertical integration model and house the breadth of products we offer.
“The acquisitions are part of our strategy outlined in our prospectus to acquire several Carline automotive outlets in the medium term and provides an opportunity to add further value to the businesses through revenue synergies from cross-selling products, and cost synergies from the scale benefits of a larger RPM Group.
“We continue to evaluate further bolt-on and strategic acquisitions in line with RPM’s focussed growth strategy,” he says.
Opened in 1990 as a Carline Automotive Store, Carline Cairns is one of the oldest as well as one of the largest Auto repair centres in FNQ says RPM. It says the store manager brings 17 years of experience with the business, while the vendor will continue to be involved as landlord of the business’ operations.
The Townsville store opened in 2015, and immediately became a member of the Revolution Racegear Franchise Group, and subsequently joined the Carline Group in 2019 and is well- known and respected as a performance tuning centre and motorsport outlet says RPM.
“From a motorsport perspective, as the host of two rounds of the Supercars Championship, Townsville is an important motorsport hub in North Queensland that will continue to grow upon completion of the new purpose-built motorsport facility at Woodstock later this year,” Finkelstein says.
The RPM Autoparts Townsville distribution centre services all customers north of Rockhampton. The business distributes a wide range of RPM’s tyre categories and brands; however, the focus initially will be on commercial, industrial and 4×4 passenger tyres, with significant opportunities to increase the group’s passenger tyre and off road tyre turnover.
It also distributes RPM’s Performance and Accessories Division’s products. With a high concentration of RPM Autoparts customers, and Carline Automotive Stores in the broader region, this new venture will enable RPM to more effectively provide logistics support to its business network across the region while also significantly reducing logistics costs.
According to RPM Automotive Group the combined retail businesses are forecast to generate $3.5 million in revenue and $525k in EBITDA in FY22. The two businesses will contribute around 15% to the Repairs & Roadside Division in FY22.
It says the RPM Autoparts Townsville distribution centre is expected to generate $3.75 million in turnover and more than $300k in EBITDA in its first 12 months of trading (expected opening date October 1, 2021).
The total purchase price of is $500k, with consideration comprising of $125k cash and $375k in RPM shares (valued at RPM’s 60-day weighted average price from signing of the sale and purchase agreement). The cash payments will be funded from RPM’s existing cash reserves.
The sale and purchase agreements contain standard conditions precedent for completion, and RPM says it anticipates completing the acquisitions on or around September 1, 2021.
