Arriva Sells Car Leasing Division to General Motors for £226 Million

Strategic Insights -

Arriva, the UK-based public transport company, has taken a significant step towards a major break-up by selling its car leasing division to General Motors of the US for £226 million in cash. The deal also includes £278 million of debt, which reduces Arriva's borrowings to £200 million and takes its gearing to 35 per cent. The sale is General Motors' first major acquisition in the UK, sparking speculation that it may be challenging Ford's dominance in the British transport sector.

Key Takeaways:

  • Arriva has sold its car leasing division to General Motors for £226 million in cash, in addition to £278 million of debt.
  • The deal reduces Arriva's borrowings to £200 million and takes its gearing to 35 per cent.
  • General Motors' purchase is the company's first major acquisition in the UK, with some analysts suggesting it may challenge Ford's dominance in the British transport sector.
  • The sale is part of a broader break-up of Arriva, with City analysts noting that the company's break-up will not be complete unless it sells its car dealerships.
  • The car leasing division has been sold to General Motors Acceptance Corporation (GMAC), which is completing the deal.
  • GMAC already runs Vauxhall Finance, which lends money to British Vauxhall dealers.
  • Ford, a rival to General Motors, has made significant recent acquisitions in the UK transport sector, including a £1 billion takeover of Kwik-Fit Holdings and a joint bid for Dagenham Motors.
  • However, Ford has pulled out of the auction for the Automobile Association, with bids reaching up to £1.5 billion.

Statistics:

  • £226 million: The cash price paid by General Motors for Arriva's car leasing division.
  • £278 million: The debt component of the deal.
  • Pounds 200 million: Arriva's reduced borrowings after the deal.
  • 35 per cent: Arriva's gearing after the deal.
  • 4p: The increase in Arriva's share price after the announcement.
  • 406p: The share price of Arriva after the announcement.
  • £1 billion: The price paid by Ford for Kwik-Fit Holdings.
  • £1.5 billion: The highest bid for the Automobile Association.

Sources:

  • The Times, 1999.