Halfords in Talks for a £1.4 Billion Merger Deal

Established in 1892, Halfords stands as a prominent and well-known entity in the retail sector. Recently, Redde Northgate, a company specializing in van rentals and managing a fleet of 130,000 vehicles across the UK and Spain, proposed a £1.4 billion merger with the renowned bike and car repair chain Halfords.

Detailed negotiations were reportedly held between the two companies following Redde Northgate’s definitive offer. According to a source from the financial sector, Redde Northgate suggested a merger without any premium. However, these talks reached a stalemate due to pricing disagreements. The board of Halfords reportedly felt that the terms offered did not reflect the true value of their company.

Despite the current impasse, there’s speculation that Redde Northgate might present a new offer if the perceived value differences between the two companies narrow down. It’s also understood that the Takeover Panel has been notified about these recent discussions, which occurred over the past few months.

An individual familiar with the negotiation process commented, “Conversations were held regarding the potential integration of the two entities, but there were uncertainties concerning the valuations of each company.

“Given that the stock prices of both companies were not performing particularly well at that time, there are no active discussions currently. However, the possibility of revisiting this in the future remains open.”

Established in 1892, Halfords stands as a highly recognizable and major player in the retail sector. The company employs around 12,000 staff, operates nearly 400 stores, and runs approximately 650 garages offering comprehensive repairs, MOTs, and various other services. Last year, its annual revenue reached £1.6 billion.

In the current market scenario, a merger without any premium would place the combined value of the companies at about £1.4 billion.

Redde Northgate, with its shares priced at 365p, holds a market capitalization of £843 million. Meanwhile, Halfords’ shares were trading at 234p as of last Friday, resulting in a market valuation of £512 million.

This year, Halfords’ share price has seen an 8% increase, with a significant 20% rise over the past month. On the other hand, the shares of Redde Northgate have experienced a 12% decline since the start of 2023, although they have witnessed a 13% increase in the past four weeks.

Currently, Halfords is turning its attention to smaller acquisitions. The company is in the running to purchase Wiggle, an online bicycle retailer that recently went into administration.

Redde Northgate came into existence during the pandemic through the merger of Northgate, a van rental specialist, and Redde, previously known as Helphire, which handles accident claims for businesses and company fleets. Following the merger, it acquired Nationwide Accident Services, a vehicle repair provider.

Initially catering to smaller market segments, Redde Northgate has expanded its clientele to include major corporate customers like Royal Mail, various government departments, and local authorities.

Martin Ward, the CEO, has noted that their clients prefer renting vehicles over owning them due to the flexibility it offers in managing vehicle ownership costs.

For Halfords, the growth in recent years has been increasingly fueled by its car garage network, which has proven more profitable than its bicycle sales. These services now account for 40% of the company’s total revenue, a significant increase from just 14% five years earlier.

Halfords’ strategic goal is to evolve into a business primarily focused on motoring services. While there was a surge in bicycle sales during the lockdown, this trend eventually tapered off.

Previously, Halfords was under the ownership of the pharmacy giant Boots until its sale to the private equity firm CVC in 2002. The company made its return to the stock market in 2004.

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