Acquisition

Lookers PLC 22 July 2004 22 July 2004 LOOKERS plc PROPOSED ACQUISITION OF FPS DISTRIBUTION For £31 Million Lookers, one of the leading multi-franchise motor retail groups in the UK, announces the acquisition of FPS Distribution Limited ('FPS Distribution'), one of the largest wholesale distributors of vehicle parts to the UK automotive aftermarket for a consideration of £31 million, payable in cash on completion. • FPS Distribution (originally established in 1934) has an established track record and market position in the UK automotive aftermarket, with 19 distribution centres nationwide and a customer base of over 2,400 independent motor factors • FPS Distribution's turnover for the year ended 31 March 2004 was £63.2 million with operating profit of £3.2 million • The Acquisition represents an important step in Lookers' strategy of broadening the base of its revenue stream from the automotive industry • The Directors expect that the Acquisition will be earnings enhancing after taking into account the amortisation of goodwill, in the first full year of ownership • The Acquisition is subject to the approval of Lookers' shareholders. This approval will be sought at an extraordinary general meeting expected to be held on or around 9 August 2004 • Trading in the first half of the year is in line with the Board's expectations • The Board now expects that the net amount receivable by Lookers from HM Customs and Excise regarding VAT overpaid in the period 1973 to 1996 will be at least £17.5 million Commenting on today's announcement, Fred Maguire, Chairman of Lookers, said: 'FPS Distribution is a high quality business with excellent relationships in the UK automotive aftermarket. This strategic acquisition enhances the Group's earnings potential in the fast growing after sales market and reinforces Lookers' commitment to delivering excellent products and services to its customers through its 'Customers for Life' programmes.' This summary should be read in conjunction with the full text of the following announcement. Appendix I contains the definitions of terms used in this announcement. Press Enquiries: Lookers plc 0161 291 0043 Fred Maguire (Chairman) Ken Surgenor (Chief Executive) David Dyson (Finance Director) N M Rothschild & Sons Limited 0161 827 3800 Andrew Thomas gcg hudson sandler 020 7796 4133 James Hill N M Rothschild & Sons Limited, which is authorised and regulated by the Financial Services Authority, is acting exclusively for Lookers and for no-one else in connection with the Acquisition and will not be responsible to anyone other than Lookers for providing the protections afforded to customers of Rothschild or for providing advice in relation to the Acquisition. Lookers plc PROPOSED acquisition of FPS Distribution Introduction The Board of Lookers announces the proposed acquisition of FPS Distribution, one of the largest wholesale distributors of vehicle parts to the UK automotive aftermarket. Alongside the continuing development of the Group's core manufacturer franchise business, this is another important step in Lookers' strategy of broadening the base of its revenue streams from the automotive industry. The total consideration of £31.05 million is payable in cash upon Completion. The Acquisition, which will be undertaken by DSM Autos Limited (a wholly owned subsidiary of Lookers), will be funded from the Group's existing cash reserves and new banking facilities. In view of its size, the Acquisition is conditional upon the approval of Lookers' shareholders. The Chairman of Lookers will write to Lookers Shareholders as soon as practicable to provide them with further details of the Acquisition and convene an Extraordinary General Meeting, expected to take place on or around 9 August 2004, to seek such approval. Background to and reasons for the Acquisition Lookers is one of the UK's leading multi-franchise motor retail groups, operating a network of 93 outlets, vehicle servicing and parts sales facilities. Aftersales activities, comprising vehicle servicing, parts sales, tyres and bodywork, are an important contributor to the Group's profits and in the year ended 31 December 2003 generated approximately 47 per cent. of the total gross profit of the Group from a substantially lower proportion of the Group's sales. Originally established in 1934, FPS Distribution is the leading UK wholesale distributor of vehicle parts to the automotive aftermarket, with 19 distribution centres nationwide. The Acquisition will enable the Enlarged Group to enhance its earnings potential in the aftersales market through a business which directly complements its main activity of vehicle sales and servicing. FPS Distribution has an established track record and market position with excellent prospects for continued growth and high quality earnings potential. The Directors believe that the Enlarged Group will benefit from FPS Distribution's proven expertise in parts handling, stock control and distribution which can be applied to all areas of the existing Lookers business. The acquisition of FPS Distribution will enable the Group to play a significant role in the wholesaling of vehicle parts to local distributors (factors). This is an area of potential growth in the automotive industry where Lookers has previously played only a minor role. Information on FPS Distribution FPS Distribution is a nationwide wholesale distributor of vehicle parts to the UK automotive aftermarket. FPS Distribution's two main services are: (a) same day delivery of parts required by customers for immediate resale, generally serviced from its national network of 19 distribution branches; and (b) overnight fulfilment of customer stock orders on behalf of third party original equipment manufacturers, serviced from FPS Distribution's national distribution centre. FPS Distribution's customer base comprises over 2,400 independent motor factors operating more than 3,500 outlets located across the UK. The summarised historical results of FPS Distribution are set out below. 56 weeks 52 weeks 52 weeks ended ended ended 30 March 29 March 27 March 2002 2003 2004 £'000 £'000 £'000 Turnover 55,104 59,086 63,220 Operating profit (pre-exceptional credits) 1,132 2,303 3,212 Net assets 13,742 15,375 18,168 FPS Distribution comprises two statutory companies FPS Distribution Limited and its wholly owned subsidiary, Ferraris Piston Services Limited. FPS Distribution is currently owned by ABN AMRO Capital and its management and employees. Financial effects of the Acquisition The Directors expect that the Acquisition will be earnings enhancing, after taking into account the amortisation of goodwill, in the first full year of ownership. The foregoing statement should not be interpreted as a profit forecast nor to mean that Lookers' future earnings per share will necessarily be greater than its historical earnings per share. Financing the Acquisition Lookers has conditionally agreed to acquire the entire issued share capital of FPS Distribution for a total consideration of £31.05 million, payable in cash upon Completion. The Acquisition will be financed from the Group's existing cash reserves and new banking facilities. The Lookers Group has entered into a new committed loan facility totalling £30 million with Lloyds TSB Bank plc to finance the Acquisition. The Acquisition will result in a cash outflow of approximately £31.05 million. The Board of Lookers believes that the level of gearing that will result if the Shareholders approve the Acquisition will be acceptable given the cash generative nature of the Enlarged Group and it is envisaged that borrowing levels will be steadily reduced. The Directors are confident that the Enlarged Group will retain sufficient financial flexibility to continue to invest in developing the business and to take advantage of further acquisition opportunities as they arise. Principal terms and conditions of the Acquisition The Acquisition Agreement contains various warranties and indemnities in favour of the Group which are typical for a transaction of this nature. The warranties are provided by the sellers of approximately 27 per cent. of the share capital of FPS Distribution (being the management shareholders) who shall be liable for up to £5 million in the event of any future claim. No warranties (other than in respect of title and capacity) are given by the institutional shareholders or the employee shareholders of FPS Distribution. The Acquisition is conditional upon the approval of Lookers Shareholders. It is expected that Completion will take place on 9 August 2004 or as soon thereafter as all of the conditions have been satisfied. FPS Distribution's management and employees One of the key attractions of the Acquisition for Lookers is the industry experience of FPS Distribution's management team. The senior management of FPS Distribution have agreed to enter into service contracts with FPS Distribution for a period of at least twelve months from the date of the Acquisition. Lookers intends that the senior management of FPS Distribution will be strongly incentivised to participate in the continuing growth of the business. Lookers also intends to make available appropriate employee incentivisation arrangements to the senior FPS Distribution employees. It is anticipated that career opportunities for employees of the Enlarged Group will be enhanced as a result of the Acquisition. Lookers has confirmed that existing FPS Distribution employment agreements will be honoured. Current trading and prospects The Group updated shareholders on current trading in the first quarter in the AGM statement on 13 May 2004. Trading in the second quarter is typically at lower levels than the first quarter and the current year has been no exception, but overall, trading for the first half year was in line with the Board's expectations. The Board also announced on 24 May 2004 that the Group had successfully negotiated with HM Customs and Excise its initial claim in respect of VAT overpaid in the period 1973 to 1996 and that the Board anticipated that it would receive at least £15 million net of expenses. The Board now expects that the net amount receivable by Lookers will be at least £17.5 million. The Acquisition will enable the Enlarged Group to enhance its earnings potential in the aftersales market through a business which complements its main activities of vehicle sales and servicing. Industry forecasts suggest 2004 will be the fourth consecutive record year for the new vehicle market. The continuing strong car market combined with Lookers' ongoing commitment to providing quality customer services and its organic initiatives in reducing costs and driving operating efficiencies give the Board confidence that the Enlarged Group will achieve a strong performance this year. Recommendation The Directors, who have been advised by Rothschild, consider that the Acquisition is in the best interests of Lookers and its shareholders as a whole. In providing advice to the Directors, Rothschild has taken into account the Directors' commercial assessments of the Acquisition. In the forthcoming circular to Shareholders, the Directors unanimously recommend that you vote in favour of the Acquisition at the Extraordinary General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial interests, which in aggregate amount to 616,981 Lookers Shares, representing approximately 1.75 per cent of the issued ordinary share capital of the Company. In addition, the Company has received irrevocable undertakings from certain other shareholders holding in aggregate, 10,071,320 Lookers shares, representing approximately 28.64 per cent of the existing issued ordinary share capital, to vote in favour of the Acquisition at the Extraordinary General meeting. APPENDIX I DEFINITIONS The following definitions apply throughout this Press announcement unless the context requires otherwise: 'Acquisition' the proposed acquisition of FPS Distribution Limited by DSM Autos Limited (a wholly owned subsidiary of Lookers) 'Acquisition Agreement' The conditional agreement dated 21 July 2004 between DSM Autos Limited and the shareholders of FPS Distribution pursuant to which Lookers will effect the Acquisition a summary of which will be set out in the Circular 'Act' The Companies Act 1985, as amended 'Articles of Association' The articles of association of the Company from time to time in force and references to an 'Article' shall be construed accordingly 'Circular' The document to be sent to Shareholders in connection with the Acquisition and containing the notice convening the Extraordinary General Meeting 'Completion' Completion of the Acquisition pursuant to the Acquisition Agreement 'Directors' or 'Board' The Directors of Lookers at the date of the Circular 'Enlarged Group' The Lookers group as enlarged by the Acquisition 'Extraordinary General Meeting' The extraordinary general meeting expected to be held on or around 9 August 2004 for the purpose, inter-alia, of giving approval to the Acquisition 'Group' the Company and its subsidiaries, as at the date of this announcement 'Lookers' or 'the Company' Lookers plc 'Lookers Shares' Ordinary shares of 25p each in Lookers 'Lookers Shareholders' Holders of Lookers Shares 'Lookers Share Option Schemes' The Lookers Execution Share Option Scheme, the Lookers Company Share Scheme and the Lookers plc Key Executive Incentive Performance Plan 'FPS Distribution' FPS Distribution Limited Limited and its wholly owned subsidiary, Ferraris Piston Service Limited 'New Bank Facility' The facility for £30m to be provided by Lloyds TSB Bank plc 'Rothschild' N M Rothschild & Sons Limited 'United Kingdom' or 'U.K.' United Kingdom of Great Britain and Northern Ireland This information is provided by RNS The company news service from the London Stock Exchange

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