Acquisition

European Motor Hldgs PLC
14 June 2005


European Motor Holdings plc - Acquisition


14 June 2005


European Motor Holdings plc ("EMH" or the "Company") proposed acquisition of
Smith Knight Fay (Holdings) Limited


The Board of EMH is pleased to announce today the acquisition of SKF Holdings, a
privately owned motor retail business operating eighteen motor retail franchises
in the North West of England.


Highlights of the Acquisition

+----+-------------------------------------------------------------------------+
| -  |EMH has agreed to acquire SKF Holdings for a consideration of            |
|    |approximately £29.8 million to be funded out of existing cash resources  |
|    |and bank facilities. Of this amount, EMH will retain £1.5 million for the|
|    |allotment and issuance of 603,378 Ordinary Shares to the Seller which the|
|    |Seller has subscribed for, conditional on Completion and Admission.      |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+
| -  |The Acquisition is conditional, inter alia, upon the approval of EMH     |
|    |Shareholders and of the FSA.                                             |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+
| -  |A circular to Shareholders containing full details of the Acquisition and|
|    |containing a notice of an Extraordinary General Meeting will be sent to  |
|    |EMH Shareholders in due course.                                          |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+


Principal reasons for the Acquisition

+----+-------------------------------------------------------------------------+
| -  |Increasing EMH's geographic presence in the North West of England where  |
|    |the Group already has a number of established and successful businesses, |
|    |thereby increasing its penetration and offering enhanced opportunities   |
|    |for management synergy within the complementary territories of the       |
|    |Enlarged Group and its manufacturer partners.                            |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+
| -  |Providing the Enlarged Group with greater buying power to increase       |
|    |economies of scale.                                                      |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+
| -  |Strengthening the Group's position and relationship with Audi and        |
|    |Volkswagen and providing the Group with new opportunities with Toyota and|
|    |Lexus with whom the Directors have entered preliminary discussions with  |
|    |regard to representation. Procedures have commenced to assess the        |
|    |Enlarged Group's candidacy for those franchises and approval has been    |
|    |given for SKF to continue to operate those franchises in the intervening |
|    |period.                                                                  |
+----+-------------------------------------------------------------------------+
|    |                                                                         |
|    |                                                                         |
|    |                                                                         |
+----+-------------------------------------------------------------------------+
| -  |Providing additional central resource.                                   |
+----+-------------------------------------------------------------------------+


The Directors of EMH believe that the Acquisition will be earnings enhancing for
the Group in its first full financial year(1)

1      This statement should not be interpreted to mean that the future earnings
per share of EMH following the Acquisition will necessarily match or exceed the
historical earnings per share of EMH


Commenting on the Acquisition, Richard Palmer, Chief Executive of EMH, said:


"We have spent some time looking at a variety of different acquisition
opportunities. We are convinced that the SKF acquisition is the right one for
EMH as it gives the right geographical, franchise and operational mix to fulfil
the Group's stated strategy.  The Enlarged Group will have many opportunities to
achieve improvements from management synergy and economies of scale in the years
to come."


Enquiries:


European Motor Holdings plc                           01491 413 399
Richard Palmer
Ann Wilson


Investec Investment Banking                            020 7597 4000
Keith Anderson
Erik Anderson



Investec, which is authorised and regulated by the Financial Services Authority,
is acting for EMH in connection with the Acquisition and is not acting for any
person other than EMH and will not be responsible to any other person other than
EMH for providing the protections afforded to its customers or for providing
advice to any other person in connection with the Acquisition.






                      Proposed Acquisition of SKF Holdings



The Board of EMH is pleased to announce today that it has reached agreement,
conditional on shareholder approval and FSA approval, to acquire the entire
issued share capital of SKF Holdings for a total consideration of approximately
£29.8 million in cash, subject to certain adjustments.  It has been agreed that,
of the total consideration, EMH will retain £1.5 million for the allotment and
issuance of 603,378 Ordinary Shares to the Seller which the Seller has
subscribed for conditional on Completion and Admission. The Subscription Shares
will be issued at a price of 248.6 pence per share and will represent
approximately 1.12 per cent. of the enlarged issued share capital of the Company
following the issue of such Subscription Shares.  The Consideration is to be
funded from EMH's existing cash resources and bank facilities.


In view of its size in relation to EMH, the Acquisition is conditional upon the
approval of Shareholders at an Extraordinary General Meeting to be convened for
this purpose.


A document providing Shareholders with information relating to the Acquisition,
to explain the rationale for the Acquisition and why the directors of EMH
consider the Acquisition to be in the best interests of EMH and the Shareholders
as a whole will be sent to Shareholders in due course. The document will also
include a Notice of the Extraordinary General Meeting at which the Resolution
will be proposed.


The Directors have irrevocably undertaken to vote in favour of the Resolution in
respect of their entire aggregate beneficial shareholdings in EMH amounting to
2.6 per cent. of EMH's current issued share capital (prior to the issue of the
Subscription Shares).



Information on EMH


EMH operates through two principal divisions: Motor Retail and Motor Services.


Motor Retail Division


The Motor Retail Division operates thirty seven motor retail franchises selling
new and used vehicles and providing after sales service.  The Motor Retail
Division concentrates on premium marques and has chosen strategically to
represent a relatively small number of manufacturers in this segment of the
market.  Following a period of selected acquisitions of premium franchises and
controlled disposals of non-core businesses, thirty five of the Motor Retail
Division's thirty-seven franchises are now held with its chosen manufacturer
partners; the BMW group, the Premier Automotive Group and the Volkswagen group.
The remaining two franchises are held with MG Rover and, as announced on 27
April 2005 following the placing of MG Rover Group Limited into administration,
the Board decided to implement a structured closure of these dealerships and one
has already been closed.  The Motor Retail Division's continuing dealerships are
mainly located in the North East and North West of England, together with a
smaller number in South West London and the West and East of England.  The Motor
Retail Division generally operates in market areas where it has a number of
franchises for the same manufacturer with contiguous territories. This allows
the Motor Retail Division to benefit from the co-ordinated marketing and the
operating and financial efficiencies that this structure affords.


The Motor Retail Division's dealerships are:


Audi                Swindon, Tetbury
Bentley             Leicester, Newcastle, Norwich
BMW                 Malton, Stockton, Sunderland, York
BMW motor cycles    Sunderland
Jaguar              Doncaster, Harrogate, Leeds, Preston, York
Land Rover          Chester, Preston
MG Rover            Chester
MINI                Malton, Stockton, Sunderland, York
Volkswagen          Bebington, Chester, Cirencester, Chiswick, 
                    Heathrow, Sunderland, Twickenham, Wrexham
Volvo               Durham, Harrogate, Hexham, Newcastle, Stockton, Sunderland


The Motor Retail Division also operates motor auctions in Telford and
Queensferry and holds the United Kingdom import and distribution licence for the
Perodua range of cars manufactured in Malaysia.


Motor Services Division


The principal operating company in the Motor Services Division is Wilcomatic
Limited, a market leader in the sale and servicing of vehicle washing equipment
in the United Kingdom.  Its main customers are supermarkets, oil companies,
independent forecourts and motor retail businesses.


Information on SKF Group


The SKF Group is a privately owned motor retail business, founded by the Seller
in 1970 which currently operates eighteen motor retail franchises in the North
West of England, which are:


Audi                                    Bolton, Chester, Macclesfield, Stockport
Lexus                                   Stockport
Mazda                                   Stockport
Toyota                                  Denton, Macclesfield, Stockport
Volkswagen                              Altrincham, Bolton, Bury, Hyde, 
                                        Macclesfield, Manchester, Oldham, 
                                        Stockport
Volkswagen light commercial vehicles    Manchester



The table below summarises the results of the SKF Group for the three years
ended 31 May 2004 and the net assets of the SKF Group at each of those dates.
                                                    2004       2003       2002

                                                   £'000      £'000      £'000

Turnover                                         273,930    191,711    154,232

Operating profit                                   5,538      4,149      4,140

Profit on ordinary activities before taxation      4,182      3,829      3,172

Profit on ordinary activities after taxation       2,822      2,870      2,129

Net assets                                        16,639     14,022     11,452


The above figures have been extracted without material adjustment from the
accountants' report on SKF Holdings set out in the circular to be sent to
Shareholders.  In order to make a proper assessment of the financial position of
SKF Holdings, the Shareholders should not rely solely on the summary financial
information set out above but should read the whole of the circular being sent
to Shareholders.


The SKF Holding's business has grown substantially over the past three years as
a result of a series of acquisitions.  During the year ended 31 May 2004, the
consolidation of those acquisitions coincided with a difficult period for
Volkswagen, which represents half of the SKF Group's franchises.  As a result,
the profit before taxation for that year of £4.2 million was below the SKF Group
's management expectations. The difficulties associated with Volkswagen
continued into the financial year ended 31 May 2005, particularly within the SKF
Group's newly acquired businesses, and resulted in a substantial deterioration
in the SKF Group's trading.  However, Volkswagen has announced plans to
introduce within the next twelve months a number of significant new models in
the United Kingdom; the new Passat range, Golf Plus, new Polo, Fox, Jetta and a
Sports Convertible.  It is expected that the introduction of these vehicles,
together with other measures taken by the manufacturer, will generate an
improved trading performance of the Volkswagen dealer network. The SKF Group's
other franchises have performed satisfactorily during these periods.



Background to and reasons for the Acquisition


In line with its stated strategy, over the last five years the Group has focused
on the premium sector of the UK car retail market, disposing of non-core
businesses and building its portfolio of franchises with its chosen manufacturer
partners.  With the exception of the two MG Rover dealerships, of which one is
now closed and the other is in the process of being closed, these businesses are
all operating broadly in line with management expectations and the Group
announced a record profit in its results for the year ended 28 February 2005
following five successive financial years of profit growth.


For many years, the Group has consistently been cash generative in its
operations which, together with cash recently received in respect of a
retrospective VAT refund and associated interest and funds generated from the
disposal of certain non-core assets and businesses, has resulted in a strong
cash position.  Following the consideration of a number of alternative uses of
these funds, the Directors believe that the acquisition of the SKF Group will
best advance the continuation of the Group's successful growth strategy and
create shareholder value.


EMH benefits from the changes in October 2002 to the Block Exemption regulations
concerning new passenger cars which allow franchised dealers to acquire other
businesses holding the same franchise without prior approval from the
manufacturer.



The Board believes that the Acquisition will create a number of opportunities
and benefits including:

• increasing EMH's geographic presence in the North West of England where the
Group already has a number of established and successful businesses, thereby
increasing its penetration and offering enhanced opportunities for management
synergy within the complementary territories of the Enlarged Group and its
manufacturer partners;

• providing the Enlarged Group with greater buying power to increase economies
of scale;

• strengthening the Group's position and relationship with Audi and Volkswagen
and providing the Group with new opportunities with Toyota and Lexus with whom
the Directors have entered preliminary discussions with regard to
representation. Procedures have commenced to assess the Enlarged Group's
candidacy for those franchises and approval has been given for SKF to continue
to operate those franchises in the intervening period; and

• providing additional central resource.

The Directors of EMH believe that the Acquisition will be earnings enhancing for
the Group in its first full financial year (this statement should not be
interpreted to mean that the future earnings per share of EMH following the
Acquisition will necessarily match or exceed the historical earnings per share
of EMH).


Terms of the Acquisition


EMH has conditionally agreed to purchase the entire issued share capital of SKF
Holdings for a total consideration of £29.8 million in cash, subject to certain
adjustments relating to the net asset value of the SKF Group as at 31 May 2005.
It has been agreed that, of the total consideration, EMH will retain £1.5
million for the allotment and issuance of the Subscription Shares to the Seller
which the Seller has subscribed for, conditional on Completion and Admission.
The Subscription Shares will represent approximately 1.12 per cent of the
enlarged issued share capital of the Company following the issue of the
Subscription Shares.  The consideration is to be funded from a combination of
EMH's existing cash resources and bank facilities.  Pursuant to the Sale and
Purchase Agreement, the Seller has agreed not to sell or otherwise dispose of
the Subscription Shares for a period of 12 months from Completion and to consult
with the Company and its broker prior to any disposal of the Subscription Shares
for a period of 12 months thereafter.


EMH will acquire the SKF Group subject to its existing indebtedness.  As at 31
May 2004, the last date to which SKF has prepared audited accounts, the
indebtedness of SKF (excluding vehicle financing) was £27.9 million.


The Subscription Shares will, when issued, rank pari passu in all respects with
the existing Ordinary Shares in issue at the date of Completion including the
right to receive all dividends thereafter declared, made or paid on the issued
share capital of the Company.  Application has been made for the Subscription
Shares to be admitted to the Official List and the London Stock Exchange's
market for listed securities. The Subscription Shares are being issued to the
Seller pursuant to the Sale and Purchase Agreement and are not being marketed in
whole or in part to the public in conjunction with the application.


The Acquisition is conditional on the approval of Shareholders which is to be
sought at the EGM to be convened for this purpose and on obtaining regulatory
consent from the FSA.


Further details of the Sale and Purchase Agreement will be set out in the
circular to be sent to Shareholders in due course.



Management and organisation of the Enlarged Group


The Board is delighted that SKF Holdings' Chairman and Chief Executive, Mr
Knight, will, on Completion, continue his existing role within the SKF Group.
He and the operational directors of SKF have confirmed their intention to stay
with the Enlarged Group following the Acquisition. On Completion, Richard Palmer
and Ann Wilson will join SKF Holdings' board.


On Completion, the SKF Group will become part of EMH's Motor Retail Division.


Current Trading and Prospects of EMH


As announced on 27 April 2005, the Group enjoyed record profit before tax and
exceptional items of £15.5 million for the year ended 28 February 2005.  In
addition, the Group made exceptional profits of £14.6 million in the same
period.  Trading since the results for the year ended 28 February 2005 has been
encouraging and remains in line with management expectations.  The Directors of
the Company look forward to the rest of the current financial year with
confidence.






                                  DEFINITIONS


The following definitions apply throughout this announcement unless the context
requires otherwise:



"£"                                    pounds sterling, the lawful currency of 
                                       the United Kingdom


"Acquisition"                          the acquisition of the entire issued
                                       share capital of SKF Holdings by EMH 
                                       pursuant to the Sale and Purchase 
                                       Agreement


"Admission"                            (i) the admission of the Subscription
                                       Shares to the Official List of the UK 
                                       Listing Authority becoming effective in
                                       accordance with the Listing Rules; and 
                                       (ii) admission of the Subscription Shares
                                       to trading on the London Stock Exchange's
                                       main market for listed securities
                                       becoming effective in accordance with the
                                       Admission and Disclosure Standards of the
                                       London Stock Exchange from time to time


"Board" or "Directors"                 the directors of EMH being Roger John 
                                       Smith (Non Executive Chairman), Richard 
                                       Terence Palmer (Chief Executive), Ann 
                                       Chrisette Wilson (Finance Director) and 
                                       Roger Graham Abrahams (Non Executive 
                                       Director)


"Completion"                           completion of the Acquisition pursuant to
                                       the Sale and Purchase Agreement


"Consideration"                        the consideration payable by EMH to the
                                       Seller for the entire issued share 
                                       capital of SKF Holdings, being cash
                                       consideration of approximately £29.8 
                                       million (of which £1.5 million will be
                                       retained by EMH as subscription monies 
                                       payable by the Seller for the
                                       Subscription Shares), subject to certain 
                                       adjustments as set out in the Sale and
                                       Purchase Agreement


"EGM" or                               the Extraordinary General Meeting of the 
"Extraordinary General Meeting"        Company, notice of which will be included
                                       with the circular to shareholders to be 
                                       posted in due course


"EMH" or "the "Company"                European Motor Holdings plc


"Enlarged Group"                       the Group following Completion


"FSA"                                  the Financial Services Authority
                     

"FSMA"                                 the Financial Services and Markets Act 
                                       2000


"Group"                                EMH and its subsidiaries


"Investec"                             Investec Investment Banking, a division 
                                       of Investec Bank (UK) Limited, which is 
                                       regulated by the Financial Services 
                                       Authority


"SKF"                                  Smith Knight Fay Limited


"SKF Holdings"                         Smith Knight Fay (Holdings) Limited


"SKF Group"                            SKF Holdings and its subsidiaries and any
                                       subsidiaries of such subsidiaries


"Listing Rules"                        the listing rules made by the UKLA for 
                                       the purposes of Part VI of FSMA, as 
                                       amended from time to time


"London Stock Exchange"                London Stock Exchange plc



"Notice"                               the Notice of EGM to be included with the
                                       circular to shareholders to be posted in
                                       due course


"Ordinary Shares"                      ordinary shares of 40p each in the 
                                       capital of the Company


"Resolution"                           the resolution set out in the Notice


"Sale and Purchase Agreement"          the conditional agreement between 
                                       (1) Seller, and (2) EMH dated 13 June 
                                       2005 in respect, inter alia, of the 
                                       Acquisition, a summary of which will be 
                                       set out in the circular to shareholders 
                                       to be posted in due course


"Seller"                               Graham Knight


"Shareholders"                         holders of Ordinary Shares


"Subscription Shares"                  the 603,378 Ordinary Shares to be issued 
                                       to the Seller on Completion pursuant to 
                                       the Sale and Purchase Agreement


"UKLA"                                 the UK Listing Authority, part of the 
                                       Financial Services Authority, acting in 
                                       its capacity as the competent authority 
                                       for the purposes of Part VI of FSMA



All references to time are to London Time.




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