RPM Automotive Group continues sustainable growth strategy by acquiring East Coast Tyre Wholesalers

RPM Automotive Group Ltd (ASX:RPM) shares have risen following the acquisition of East Coast Tyre Wholesalers, further expanding its Wheel and Tyre Division and maintaining its sustainable growth strategy. The acquisition of East Coast Tyre Wholesalers (ECTW), which will be effective from September 1, is strongly aligned with RPM’s goal of expanding the group’s Wheels and Tyres wholesale and distribution platform. ECTW is a tyre and wheel importer based in western Sydney, NSW, with a healthy distribution network countrywide. It has been trading for more than 13 years, priding itself on providing the best customer service and quality tyres at the best prices. RPM shares have been as much as 5.41% higher intra-day to 39 cents. “Operationally aligned” Chief executive officer Clive Finkelstein said: “I am delighted to welcome East Coast Tyre Wholesalers to the RPM fold. “Our businesses are operationally aligned, often in parallel markets and tyre segments. “We see attractive potential to add value and revenue to both businesses through cross-selling of products and tyre brands to different customer bases, as well as cost synergies as a result of the scale achieved. “This acquisition is funded from our recent capital raise and will be immediately earnings accretive. “It is another example of our sustainable growth strategy designed to grow RPM into Australia’s leading business operating a diversity of brands across the transport and automotive aftermarket sectors.” Efficiency synergies Around $200,000 of efficiency synergies are expected from integrating ECTW with RPM’s existing Wheel and Tyre wholesale businesses. In addition, potential revenue synergies from cross-pollinating customer bases and cross-selling both RPM’s current and ECTW’s product range are expected. The group is well-positioned to provide ECTW and its customers with all the benefits that are derived from having a larger infrastructure and greater coverage. RPM Wheels and Tyres Division now has operations effectively covering the east coast of Australia. Acquisition details The acquisition is an asset purchase agreement including stock, hard assets and intangibles. The total purchase price for ECTW is $2.6 million, with consideration comprising 67.5% cash and 32.5% shares (valued at RPM’s 60-day volume-weighted average price from the signing of the sale and purchase agreement). Fifty per cent of the consideration for the acquisition will be paid on September 1, 2021, following due diligence. The remaining 50% will be paid in two annual instalments of 25% each, within 60 days of the end of FY22 and FY23, once audited financial statements for each financial year have been prepared and signed. RPM’s growth strategy remains on course, with organic business growth exceeding budget and further potential acquisitions in the pipeline. The company remains on track to generate record results in FY21, with FY22 Group Revenue forecast to exceed $75 million.