Ford to Sells Kwik-Fit at Significant Loss

DETROIT Reuters reported that Ford Motor Co. on Monday said it agreed to sell its Kwik-Fit vehicle repair business to a private equity group for less than a third of what Ford paid three years ago.

The private equity group, London-based CVC Capital Partners, will purchase Kwik-Fit for $500 million in cash and a note to be paid as CVC obtained outside financing, Ford said in a press release.

Ford spokesman David Reuter told Reuters the majority of the payment would be in cash though he would not give further details.

Kwik-Fit, based in Edinburgh, Scotland, operates some 2,500 shops across Europe that service and sell tires, brakes, exhaust systems and batteries.

Ford, which will retain a 19 percent equity stake in Kwik-Fit, is selling off noncore assets as part of a multiyear restructuring plan after a $5.45 billion loss in 2001.

The company, the world's second-largest automaker, paid the equivalent of $1.6 billion for Kwik-Fit in 1999, as part of a strategy under former Chief Executive Jacques Nasser to branch out into a broad array of automotive products and services.

Accounting irregularities discovered at Kwik-Fit last month may have helped CVC obtain a lower price for the business and more preferential terms.

But sources close to Ford and Goldman Sachs, which advised Ford on both the purchase and sale of Kwik-Fit, insisted that the low sale price had nothing to do with the accounting problem, which Goldman sources said had left a 3.4 million pound gap in Kwik-Fit's books.

Reuter would not confirm the 3.4 million pound figure, but said the discrepancy was "not a big deal" and "did not change any of the aspects of the sale whatsoever."

"We believe that the sale price today reflects present market value for Kwik-Fit. Obviously we paid more for the business than we sold it for. From our standpoint, the value of any business can vary over time for a number of reasons," he said.

Analysts have also cited a decline in European auto repair business as one factor in the lower sale price.

Ford will record a one-time, after-tax charge of about $500 million in the third quarter of 2002 related to the sale of Kwik-Fit, which is expected to be completed by the end of the year.

COLLISION TEAM SALE COMPLETED

Ford also said it completed the sale of Collision Team of America (CTA), an Indianapolis-based chain of more than 30 collision repair shops. Daniel Hall, a private businessman, agreed to purchase 100 percent of the stock and assets of CTA and operate the business. The CTA sale was completed on July 31.

The automaker did not disclose the value of the CTA transaction. The proceeds of both sales should help the company realize its goal of raising $1 billion this year from the sale of noncore operations, according to the Ford statement.

Ford also said it decided not to pursue the sale of Hertz Equipment Rental Corporation, the construction and industrial equipment rental arm of car-rental giant Hertz Corp., a wholly-owned Ford subsidiary.

The sale would have reduced funding requirements for the acquisition of equipment at Hertz, which has committed credit facilities totaling $3.4 billion at the end of last year.

Martin Inglis, Ford's group vice president for business strategy, said the sale had been postponed due to adverse business conditions.

"U.S. capital spending is not recovering as quickly as anticipated, thereby delaying the recovery we expected in the equipment rental industry," Inglis said.