Financial Times Reports Kwik-Fit Sale Hit by Accounting Irregularities

LONDON, June 28 Reuters reported that accounting irregularities have been discovered at Kwik-Fit, the vehicle repair business sold to Ford Motor Co.of the United States for one billion pounds ($1.5 billion) three years ago and now up for sale again, the Financial Times reported on Friday.

The news is likely to delay Ford's plans to sell the business, and will further depress its price, people close to the deal told Reuters.

Ford had hoped to get at least 800 million pounds but potential bidders including UK private equity groups CVC, Apax, and Permeira are understood to be negotiating a price of about 300 million pounds, the FT reported.

Investors are uneasy about accounting practices after the collapse of Enron, the energy trader and revelations at WorldCom, the stricken telecoms group.

During due diligence for the auction, Ford was warned by its auditor, PwC, that liabilities had been understated in Kwik-Fit's accounts by 3.4 million pounds, the FT said.

In effect, Kwik-Fit was receiving goods from suppliers but failing to account for the cost, as invoices had not yet been sent. This had the effect of boosting profits, the newspaper reported.

Both Kwik-Fit and Ford declined to comment on the report.

"We're in the middle of a sale and it would be inappropriate to talk," a Ford spokesman said.

A Kwik-Fit spokeswoman said any further comment on the report would come from Ford.

Details of Kwik-Fit's accounts are contained in a confidential document titled "Project Silverstone," the FT said. Ford asked PwC to prepare a report on the financial affairs of Kwik-Fit on Dec. 7, 2001, the newspaper reported.

By late January 2002, Kwik-Fit believed it had identified an understatement of liabilities by 1.5 million and asked PwC to prepare additional information, the newspaper said.