Inchcape (INCH), our newest acquisition, is a small- to mid-cap ($4B) UK-based automotive distributor and retailer that functions like a franchisee or outsourced country manager allowing major automobile manufacturers to efficiently gain access to smaller markets (like Peru, Greece, Singapore, or even Hong Kong) that do not generate enough sales volume for the original equipment manufacturers (OEMs) to want to focus on them directly. In this role, Inchcape has the exclusive rights to sell a particular brand and its related parts in a particular country, controlling distribution and selecting and managing the dealer network in the country. It is an asset light business and as such has generated high returns on invested capital. At purchase, it was trading at less than 10 times earnings, 7-8 times enterprise value1 (EV) to earnings before interest, taxes, depreciation, and amortization (EBITA), carried very little debt, and had a dividend yield of approximately 3.6%.
From Tweedy Browne (Trades, Portfolio)'s first-quarter 2018 shareholder letter.
