29 Jul 2022

HSF and White & Case headline Inchcape's £1.3bn acquisition of LatAm automotive leader Derco

Deal sees Inchcape bolster presence in existing LatAm markets and enter Bolivia

Herbert Smith Freehills (HSF) and White & Case are advising on Inchcape’s acquisition of Derco, the largest independent automotive distributor in Latin America, for £1.3bn. 

The deal, which due to its size requires Inchcape shareholder approval, would extend the London-based vehicle distributor's network in Chile, Peru and Colombia and see it enter Bolivia. 

Derco, which is almost exclusively owned by the Del Río family, operates more than 300 dealers from its headquarters in Quilicura, Chile and generated revenue of £2.0bn in FY2021. The company has long-standing partnerships with carmakers including Suzuki, Mazda and Renault.  

Inchcape CEO Duncan Tait said the acqusition had potential to deliver substantial shareholder value and “dramatically” increase the company’s scale in the fast growth Americas region.  

“We have long admired Derco’s business, and we are delighted to partner with the Del Río family,” he added.

Inchcape’s Americas and Africa regional CEO Romeo Lacerda said the deal was driven by growing demand for new vehicles in Derco’s markets, which was underpinned by long-term demographic and economic trends in those countries. 

“These powerful market dynamics provide a long runway of growth opportunities for our business,” he said. 

HSF has had a relationship with Inchcape for a number of years, with recent work including advising on the company’s entry into the Caribbean market and its exit from Russia. The firm also acted on the sale of Inchcape Fleet Solutions, its UK vehicle fleet management arm, to Toyota for £100m back in 2019. 

This time round the HSF team is led by client relationship partner Roddy Martin and associates Harriet Forrest and Meera Thakrar, with support from corporate associate Takanori Ueshima and trainees Sara Lee and Isabel Picton-Turbervill. Tax advice is being provided Aurell Taussig, Casey Dalton, James Tryfonos and Julian Nino, while Kristen Roberts, Stacey Pang and Pritika Advani are advising on financing. Veronica Roberts and Tom Kemp are handling the antitrust aspects of the combination. 

The HSF team is being assisted by Claro in Chile, Brigard Urrutia in Colombia, PPO in Bolivia and Rodrigo Elias in Peru on local law matters. 

The transaction will be financed via a mixture of debt, cash at bank and the issue of new Inchcape shares. As part of this, HSF also advised Inchcape on obtaining new bridge loan and term loan facilities of £600m to partially fund the cash element. 

Following completion of the deal the Del Río family will hold 9.3% of Inchcape’s shares and be entitled to nominate one director to the company’s board. 

The Del Río family is being advised by a team from White & Case, as well as lawyers from Chilean firm Barros & Errázuriz and Spanish heavyweight Garrigues. 

Earlier this week, HSF was revealed to be among the firms advising on the merger agreement of listed French satellite firm Eutelsat with UK government-backed rival OneWeb in a deal valued at $3.4bn. Other firms working on the deal include Weil Gotshal & Manges and Freshfields Bruckhaus Deringer.