Ford books £327m loss on disposal of Kwik-Fit

Ford is to sell Kwik-Fit for about a third of the £1bn it paid for the car repair business less than three years ago.

The motor industry giant bought Kwik-Fit in 1999 from Sir Tom Farmer, the entrepreneur who established the venture 30 years earlier in Edinburgh. At the time, Ford wanted to expand its car services business.

Yesterday the company said it would sell the unit for just £330m to CVC Capital Partners, the private-equity house. In January this year, Ford announced that it would now focus on its core car and truck manufacturing interests and set itself a target of raising $1bn (£650m) from divestments by the end of 2002.

The company said the sale would be completed later this year, forcing it to take a $500m (£327m) charge with its third-quarter results. Ford, which will retain a 19 per cent stake in Kwik-Fit, had earlier hoped to get at least £800m for the business, reports said. The company insisted that it had not over-paid for Kwik-Fit in 1999 or that the unit had gone in a firesale, despite the fact that the price it fetched represented less than half of last year's sales.

David Reuter, a spokesman for Ford, said: "Kwik-Fit was properly valued in 1999 and it's properly valued now. The market situation is different. The long-term potential of the business is not what it was in 1999."

Mr Reuter said European vehicle sales were 17.8 million in 2000 but were forecast at 17 million for 2002. He added that some of the rationale for the acquisition would still be fulfilled.

"We bought Kwik-Fit to give us broader insight into the ownership experience and closer contact with our customers.... Our 19 per cent stake means that we can still stay in touch throughout the ownership experience," Mr Reuter said.

However, Ford will hand over management control and will have just one seat on the Kwik-Fit board. The repair business has 2,500 service centres across Europe and 11,000 employees. Services include the fast-fitting of tyres, exhausts, brakes, shock absorbers, batteries, oil and MOT testing. The company had sales of £762m in 2001. Earlier this year, reports of an accounting discrepancy emerged, which meant that Kwik-Fit's liabilities had been understated by £3.4m.

Mr Reuter said this had no impact on the disposal. "CVC would not have purchased this at all if this was serious. This [accounting issue] had nothing to do with the ultimate price for the business,"he said.

Ford also announced that it had sold a small US repair business, Collision Team of America, for an undisclosed sum, but it decided to delay the sale of its Hertz Equipment Rental Corporation, as market conditions were not right for this transaction.

Martin Inglis, a Ford vice-president, said: "We are pleased to have found such suitable owners for Kwik-Fit and Collision Team of America. Although these are good businesses, they don't align with our back-to-basics strategy."

CVC announced that Sir Trevor Chinn, the outgoing chairman of Lex Service, will chair the new Kwik-Fit company that will be formed. CVC has also recently bought Halfords, the car parts and bicycle accessories business put up for sale by Boots for £410m.