Car dealership firm Inchcape is to sell its UK retail operations for around £346 million.

The firm said it has sealed a deal to sell the operation, which employs 3,600 people across more than 80 sites, to US-based rival Group 1 Automotive.

It comes after London-listed Inchcape said in January it was reviewing options for the UK business, including a possible sale, after “approaches from a number of interested parties”.

On Monday, Inchcape boss Duncan Tait said the group’s international expansion meant the “strategic importance of the UK retail operations has become limited”.

He added: “The board has therefore concluded it is the right time for a new owner to take this business forward.”

Inchcape said it will be predominantly focused on automotive distribution operations following the deal.

The company said that once the sale is completed, which is expected in the third quarter of 2024, it plans to return around £100 million to shareholders through a share buyback.

Mr Tait added: “This transaction aligns with our strategic priorities, simplifies our business and represents a compelling opportunity to deliver meaningful returns to our shareholders.

“We believe it will enhance the group’s overall value proposition and enables us to drive growth and long-term value creation for all stakeholders as we further develop our differentiated distribution platform.”

Inchcape’s UK retail business generated around £2.06 billion in revenues in the 2023 financial year, with an operating profit of £49 million.

The dealerships will help to rapidly expand Group 1’s UK business, which currently comprises of 55 dealerships, largely focused in the south east and east of England.

Daryl Kenningham, president and chief executive officer of Group 1 Automotive, said: “We are delighted to have reached an agreement to acquire Inchcape’s UK retail operations, which we have long admired given the company’s reputation for exceptional customer service, attractive portfolio of OEM (original equipment manufacturer) brand partners and high-quality management team.

“With our considerable automotive retail experience in the United States and the UK, we look forward to building on Inchcape’s strong industry relationships and leveraging our expertise to support our combined operations in their next phase of growth.”