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  • RPM Automotive (RPM) purchases two Queensland businesses, leases an auto parts distribution centre, and secures a $1.8 million underwriting deal
  • The company purchased Carline Automotive in Cairns and Carline Automotive and Revolution Racegear in Townsville as part of its next phase of expansion
  • At the same time, RPM is set to open a newly-leased distribution centre in Townsville at the start of this year
  • Alongside the news of the business transactions, RPM says it has underwritten just under $1.8 million worth of options due to expire in late August
  • Investors seem impressed with today’s string of news, with RPM shares closing 8.62 per cent higher at 32 cents each

It’s been a big day of announcements for RPM Automotive (RPM) after the company purchased two Queensland businesses, leased an auto parts distribution centre, and secured a $1.8 million underwriting deal.

The company told shareholders this morning it has purchased Carline Automotive in Cairns and Carline Automotive and Revolution Racegear in Townsville.

At the same time, the company said it leased a new warehouse in Townsville from which it will distribute its range of tire products and performance and accessories products.

RPM said all up, it spent $500,000 on the three transactions in a mix of cash and scrip: $125,000 in cash and $375,000 in RPM shares based on the company’s 60-day volume-weighted average price.

RPM CEO Clive Finkelstein said the purchase of the Carline business in Cairns and Townsville are great examples of the company’s next phase of expansion.

“Providing seamless customer experience services by our specialist staff across all our integrated brands is key to the success of RPM Automotive Group,” Mr Finkelstein said.

He added that the Townsville distribution centre will help the company improve its store supply capabilities across Far North Queensland (FNQ).

“Our new warehousing facility is fully equipped to support our vertical integration model and house the breadth of products we offer.”

Established businesses

The Carline Automotives – Cairns business opened in 1990, making it one of the oldest auto repair centres in the FNQ area, according to RPM.

Meanwhile, the Townsville store opened in 2015 and immediately became a part of the Revolution Racegear Franchise Group.

In 2019, the store joined the Carline Group, and RPM said it has become an important motorsport hub in north Queensland.

Together, the new businesses are forecast to generate $3.5 million in revenue and $525,000 in earnings before interest, tax, depreciation and amortisation (EBITDA) over the 2022 financial year.

This is not including the $3.75 million in revenue and $300,000 in EBITDA predicted from the RPM Autoparts Townsville distribution centre during its first 12 months of operation.

The distribution centre is slated to open on October 1, 2021.

“The acquisitions are value and earnings per share accretive, and well-funded from existing cash balances and share issues follow RPM’s recent capital raising,” Mr Finkelstein said.

The $1.8 million underwriting deal

Released in tandem with the announcement of the business transactions was news of an option underwriting agreement locked in by RPM.

The company said it had around 7.15 million outstanding options with an exercise price of 25 cents each which expire on August 28 this year. Together, the options are valued at just under $1.8 million.

RPM has signed a deal to underwrite the entire amount, with the underwriter to receive one per cent of the option proceeds as part of the deal.

“The underwriting of our listed options provides certainty of funding and reflects strong support for the company’s focussed growth strategy,” Mr Finkelstein said.

“We continue to evaluate further bolt-on and strategic acquisitions from a strong pipeline of opportunities.”

Investors seemed impressed with today’s string of news, with RPM shares closing 8.62 per cent higher at 32 cents each. The company has a $38 million market cap.

RPM by the numbers
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