RPM Automotive Group Ltd (ASX:RPM) has completed all transaction-related conditions for the acquisition of Citic Autoparts Pty Ltd and took ownership of the business on November 1, 2020.
Following the acquisition, Citic Autoparts has undergone a name change and is now RPM Autoparts Pty Ltd (AUT).
AUT operates in a very similar space to Spider GT, one of RPM Automotive’s subsidiaries in its Wheels and Tyres Division as an importer, wholesaler and distributor of tyres.
Plan to grow wheels & tyres business
RPM chairman Grant Carman said: “The plan is to grow the Wheels and Tyres Business and this acquisition gives us the platform to achieve our targets, while the cross-pollination of products and services only serve to complement our existing businesses.”
Citic Autoparts history
Citic Autoparts, now AUT, started in the tyre trading business in late 1994 and is considered a major distributor in the Australian tyre industry with a comprehensive product range.
With distribution facilities, complemented by salesforce and administration teams in Campbellfield, Victoria, and Sherwood, Queensland, AUT has built recognition for itself in quality services and supply of passenger and commercial tyres.
It pioneered the ‘value-for-money’ passenger tyre segment in Australia.
With 70% of the business dedicated to passenger tyres and product specifically targeted at the 4X4, SUV and LDV markets, and with their budget product range, AUT is well-positioned to take advantage of the shift in the recent buying trend in the automotive industry.
Other benefits for RPM include the ability to leverage brands and products in both SGT and AUT’s stable across both distribution platforms and customer-bases, which is expected to further improve the already impressive organic growth of this division.
Sharing of overheads, infrastructure and resources will be the next step, with immediate operational benefits and savings anticipated.
Financial performance
RPM anticipates a 3-5-year return on investment (ROI) from the acquisition.
For the 8 months to June FY21, AUT is forecast to generate approximately:
- Revenue of $12.75 million;
- Operating profit of $500,000; and
- Overall contribution of $600,000.
The company believes revenues in FY22 are likely to improve significantly as a result of consistency of supply and expected rise in demand post-COVID-19 pandemic.
