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Halfords shares soar after snapping up National Tyres for £62m

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·Business reporter
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In this photo illustration, Halfords Group PLC logo is seen on a smartphone and a pc screen. (Photo by Pavlo Gonchar / SOPA Images/Sipa USA)
The Halfords deal will make the bikes-to-car parts and servicing retailer the largest vehicle service, maintenance and repair business in the UK. Photo: Pavlo Gonchar / SOPA Images/Sipa USA

Halfords (HFD.L) received a boost from investors on Thursday, climbing as much as 5% on the day, as it agreed to acquire the owner of National Tyres for a sum of £62m ($82m).

The deal will make the bikes-to-car parts and servicing retailer the largest vehicle service, maintenance and repair business in the UK.

The purchase of Stockport-headquartered Axle Group Holdings will be paid in cash on the date of completion, which is expected to be 9 December.

It will mean that Halford’s motoring revenue will represent at least 70% of group pro-forma revenue, while services revenue is expected to grow to more than 40% of revenue.

Axle Group Holdings has brands including Autocare, Viking Wholesale Tyres, and Tyre Shopper.

Halford shares were around 5% higher on Thursday on the back of the news. Chart: Yahoo Finance
Halford shares were around 5% higher on Thursday on the back of the news. Chart: Yahoo Finance

Halfords added that its UK garage estate would grow by more than 60%, from 372 to 604 garages.

It also confirmed that a further investment of around £17m will be made post acquisition on associated capital expenditure and about £2m on integration costs.

On Thursday morning Halfords added that it had raised £63.4m of gross proceeds by placing shares with investors at 320p each.

“Given our recent track record of successfully acquiring and integrating businesses, and the potential we see to further grow our motoring services business in other areas of the country, I am very excited about our future growth prospects, and I look forward to welcoming the new teams to the business,” Graham Stapleton, chief executive of Halfords, said.

He added: “National has a high quality, UK-wide network of garages and mobile tyre fitting vans, and 1,400 highly skilled colleagues, providing a complementary fit with Halfords' existing operations.

"Post-acquisition, Halfords will have over 1,400 fixed or mobile motoring services locations, servicing a broad range of vehicles and delivering 7.5 million motoring jobs a year.”

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In a brief update to the London Stock Exchange, Halfords said the deal surpasses its current target of 550 garages and 200 consumer vans.

After completion of the acquisition, it will have around 604 garages, 234 consumer vans and 190 commercial vans.

Including its string of retail stores, this will mean a combined total of around 1,400 fixed or mobile motoring services locations.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "Halfords’ more recent acquisitions have been successful, so the market’s optimism will have something to do with expectations of a repeat performance. While the efficiencies should add to group profit pretty quickly, the bigger story is that the move helps accelerate Halfords’ plan to weight operations toward motoring services.

"Given the majority was issued via a placing, it’s not only a large deal, but also dilutive for most retail investors. That said, the group performed very well during the pandemic, and using that momentum to push toward their long term goals is a positive step.”

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