Lex plans ignite motor sector: Dealer raises funds for 100m pounds expansion

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The Independent Online
THE MOTOR sector came to life yesterday after Lex Service, the leasing company and dealer, said it planned to spend pounds 100m expanding its chain of dealerships. The money will come from the disposal of a 17.5 per cent stake in Arrow, an American electronics distributor.

Shares in rival dealers were marked up as the market guessed likely targets. Perry Group, the Hertford-based Ford dealer, rose 7p to 170p and Henlys, which last year fought off a hostile bid from T Cowie, added 9p to 148p.

Sir Trevor Chinn, Lex chairman, said yesterday that there were no immediate plans to spend the money. 'We intend to use the proceeds, over time, to continue to expand our automotive interests,' he said.

Despite the market's excitement, it is thought unlikely that Lex would be interested in launching a hostile bid for a quoted company, which could quickly drive up the price of the target. A substantial deal with a privately owned company, similar to last year's acquisition of the Swan National chain from TSB, is thought more probable.

Lex has, however, stated its intention of expanding its network of 90 car dealerships to more than 120 over the next three years. It is already the UK's leading distributor, having overtaken Inchcape, which has about 85 outlets.

Sir Trevor has also said that he wants to buy the right to import a make of car from overseas. From 1958 until last year, when the manufacturer took its distribution in-house, Lex had the sole right to import Volvo cars. In March Lex also acquired 62 Autocentres from Lucas, with the stated aim of building a branded chain of service centres.

Most of the proceeds of the Arrow disposal are expected to be spent on dealerships to take advantage of the upturn in car sales, which have risen more than a tenth so far this year.

Lex acquired its 17.5 per cent stake in Arrow Electronics, one of the world's largest electronic component distributors, last year, when it completed a withdrawal from electronics distribution. The shares were payment for Lex's own North American electronics business. It had already sold Arrow its European operations for pounds 33m.

It was always expected that Lex would sell the shares, which have been a good investment for the company. With the holding in the books at pounds 37m, Lex stands to make a substantial profit. Last year Arrow also contributed pounds 9.5m to Lex's profits.