Halfords snubs £1.4bn tie up with van hire firm which ‘undervalues’ it

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Halfords made a profit during the interim period but gross profits at its retail business were hit by high inflation and a decision to keep prices low for shoppers. 
Halfords made a profit during the interim period but gross profits at its retail business were hit by high inflation and a decision to keep prices low for shoppers. 

Halfords has reportedly snubbed a £1.4bn merger offer with van hire firm Redde Northgate as it “undervalues” the motor and cycling group. 

However, a potential deal may not be completely off the cards, a source told The Telegraph: “There were discussions about what an integration of the two businesses might look like, but there were questions over the valuations of both companies.”

“Both share prices weren’t doing fantastically well at the time so there is nothing live at the moment. However, it could come back.”

Halfords board reportedly rejected the offer on the terms that the deal undervalued the high street retailer. 

However, it is understood that Redde Northgate could launch a fresh bid if “the valuation gap between the two sides closes”.

Halfords is one of the UK’s most popular retailers with over 400 stores in the country.

Following the reports, its share price dropped by more than one per cent.

It has shown signs of recovering in recent months, thanks to push towards budget auto care amid the cost of living crisis, posting a 14.1 per cent hike in revenue for the first five months of the year. 

News of a rebound came after the firm reported a £38.3m drop in annual profits as the group was hit by a decline in consumer demand following its lockdown boom and a tough economic climate.

Russ Mould, investment director at AJ Bell, said that “few people would have predicted Redde Northgate would be sniffing around Halfords.”

“Reports suggest Redde Northgate held merger talks with Halfords but couldn’t agree on valuation. At face value, a van hire company buying a retailer is not the most obvious partnership.”

He added: “However, they have complementary skills and putting them together would broaden their reach as Redde could have greater access to the consumer market and Halfords to the business market.”

“Halfords has been trying to reposition itself as a motoring services business in recent years, becoming less reliant on selling bicycles and investing more in garages and hiring workers to fix vehicles. Redde Northgate was formed from the merger of two businesses active in accident claims management and van hire.”

City A.M has contacted Halfords and Redde Northgate for a comment.