RPM Automotive Group has acquired two specialist tyre businesses, Victoria Wide Tyre Service and ACT Total Tyres.
RPM will pay $6.8 million for Victoria Wide Tyre Service, split 65 per cent in cash and 35 per cent in RPM ordinary shares (escrowed for 12 and 24 months from the issue date) at an issue price equivalent to the weighted average share price over the previous 60 days. Consideration will be paid 50 per cent on completion and the balance 12 months later.
RPM will pay $0.87 million for ACT Total Tyres, split 50 per cent in cash and 50 per cent in RPM ordinary shares (escrowed for 12 months from the issue date) at an issue price equivalent to the weighted average share price over the previous 60 days. Consideration will be paid 50 per cent on completion, 25 per cent after 12 months and a further 25 per cent after 24 months.
“When assessing businesses to acquire, they must meet our strict criteria for best-in-class service, industry knowledge and a strong cultural alignment with the RPM Group,” said RPM CEO, Clive Finkelstein. “With over 70 years of combined experience between Vic Wide and ACT Tyres management, they will support RPM continuing to provide above industry service standards to our customers. Both businesses are run by experienced, well-respected managers who know the RPM Group well, buy into our strategy, and will fit extremely well with our culture.
The acquisition of Victoria Wide Tyre Services positions RPM as one of the largest commercial tyre businesses in metropolitan Melbourne by volume.
“These acquisitions enhance RPM’s network effect, as we increase the number of customers we provide services to while also improving our service capabilities. The net result is unparalleled customer service across more strategic locations,” said Finkelstein.
Once integrated into the group, RPM expects the businesses to provide significant cost synergies.
Victoria Wide Tyre Service has operated for more than 20 years and is forecast to generate $11 million revenue, $1.7 million EBITDA and $1.45 million NPBT in FY22. The acquisition price of $6.8 million (cash and equity) represents four times EBITDA pre-synergies.
This transaction is expected to generate further operational synergies to RPM of more than $350,000 per annum across metro retail tyre operations.
ACT Total Tyres was established more than 30 years ago. It operates in Fyshwick and is one of the largest commercial tyre retail outlets in the ACT. ACT Tyres generated $2.6 million revenue in FY21 and is expected to generate EBITDA of $300,000. Consideration of $870,000 (cash and equity) represents less than three times EBITDA and is consistent with RPM’s successful growth strategy.
The acquisition will also provide RPM with increased scale and ability to service current customers who have regional depots in the ACT.
RPM’s Repairs and Roadside Division now comprise seven businesses, operating from 12 locations, and generating more than $43 million in sales, while the group generates in excess of $100 million sales on an annualised basis.