Financial Times Take On Ford selling Kwik-Fit at a big loss

"Ford was yesterday forced to sell Kwik-Fit for barely a third of what it paid for the European car repair chain three years ago.

The US carmaker, which bought Kwik-Fit for £1bn in 1999, sold the business to CVC Capital Partners, the private equity house, for £330m. The deal brings Ford's foray into auto services to an embarrassing conclusion.

Details of accounting irregularities at Kwik-Fit helped undermine the sale. A report for Ford by PwC, the auditing firm, revealed that liabilities had been understated in Kwik-Fit's accounts by £3.4m.

Ford admitted that the loss it had made on its investment would force it to take an exceptional charge of $500m (£318m) in the third quarter of 2002.

The deal also comes as a blow to Goldman Sachs, which advised Ford both on the acquisition three years ago and on the sale to CVC. The investment bank declined to comment.

A Ford spokesman said: "We think the price reflects what is the present market value of the business." He denied that the accounting irregularities had affected the sale.

Ford decided to sell Kwik-Fit last year, following the dismissal of Jac Nasser, the carmaker's chief executive and architect of Ford's diversification strategy. The disposal is the cornerstone of the group's drive to raise $1bn through sales of assets this year.

CVC's offer is only partly in cash, with the remaining payment coming in the form of a loan note. Not all the cash will be paid immediately. Most of it will be paid when Kwik-Fit's audited financial statements are completed in the fourth quarter of this year.

The carmaker said it would retain a 19 per cent stake in Kwik-Fit "in order to benefit from the business's future growth". This means the deal values the entire business at £407m - much lower than analysts' estimates of £600m-£800m.

CVC's bid defeated several rival offers, including one from Sir Tom Farmer, who founded Kwik-Fit in 1971. Sir Tom stepped back from his post as chairman in anticipation of his bid.

Sir Tom declined to say whether he would remain with the business.

CVC would not comment but said Sir Trevor Chinn, chairman and former chief executive of Lex Service, the automotive services group, would become Kwik-Fit's chairman.