Carline Automotive - Cairns and Carline Automotive and Revolution Racegear - Townsville will join the RPM group as part of ASX-lister’s growth strategy in a $500,000 deal.
The businesses will be integrated into RPM’s performance and accessories division, effective August 1, 2021, while the Townsville distribution centre expands RPM’s distribution footprint.
The acquisitions and new warehouse are set to add $6.75 million in revenue to the business every year in a move that provides increased vertical integration capability and savings, simplified logistics and broader product integration in the region.
“Next expansion phase”
RPM Automotive CEO Clive Finkelstein said: “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 great examples of our next expansion phase, purchasing some of our franchisees and members as part of our forward integration plan, 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."
Aligns with strategic rationale
RPM maintains its latest buys are strongly aligned with an existing strategy to expand the business through accretive acquisitions.
The combined retail businesses are forecast to generate $3.5 million in revenue and $525,000 in earnings before interest, taxes, depreciation and amortisation (EBIDTA) in FY22.
The two businesses are expected to contribute around 15% to the Repairs & Roadside Division in FY22.
It represents a continuation of RPM’s growth strategy following similar acquisitions, such as Elite Tyre Group, Super Tyre Mart and East Coast Tyre Wholesalers.
In addition, the RPM Autoparts Townsville distribution centre is expected to generate $3.75 million in turnover and over $300,000 in EBITDA in its first 12 months of trading, with the facility expected to open on October 1.
RPM purchased the new businesses for $500,000, comprising $125,000 in cash and $375,000 worth of RPM shares, valued at RPM’s 60-day volume-weighted average price from signing the sale and purchase agreement. The cash payments will be funded from RPM’s existing cash reserves.
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 Far North Queensland.
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.
Much later, 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.
The store manager has been with the business since its inception. 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 continued: “The acquisitions of Carline Automotive - Cairns and Carline Automotive and Revolution Racegear - Townsville (a Carline Group subsidiary) is 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.
“The acquisitions are value and earnings per share accretive, and well-funded from existing cash balances and share issues follow RPM’s recent capital raising. We continue to evaluate further bolt-on and strategic acquisitions in line with RPM’s focussed growth strategy.”
RPM anticipates finalising the acquisitions on or around September 1, 2021.
Option underwriting agreement
In addition to today’s transactions, RPM announced it had entered an option underwriting agreement, worth nearly $1.8 million.
The deal underwrites more than 7 million RPM shares, set to expire later this month, at 25 cents each, securing $1,789,397 in funding.
The underwriters will receive a fee equal to 1% of the exercise proceeds.
Speaking to the agreement, the RPM CEO said: “The underwriting of our listed options provides certainty of funding and reflects strong support for the Company’s focussed growth strategy.
“We continue to evaluate further bolt-on and strategic acquisitions from a strong pipeline of opportunities.”