Claims firm will no longer offer free telematics to 2 million consumers as previously planned
Quindell has u-turned on its plans to finance a free telematics roll-out to 2 million consumers as part of a restructuring deal with RAC.
In April the claims and technology firm signed a £30m deal with RAC that led to the creation of a new company, Connected Car Solutions (CCS), to distribute both firms’ connected car capabilities with more than 2 million telematics boxes.
But today Quindell announced a restructuring of the deal and said: “Due to market conditions beyond the control of either Quindell or RAC, the parties have concluded that it is not the best use of capital for either party to finance a free telematics roll-out to consumers as initially planned.”
Initial investment in the joint venture was £30m, with Quindell owning a 51% stake and RAC 49%. But as part of the restructure, Quindell will acquire RAC’s interest in CCS for a net cost of £3.5m to have 100% ownership.
Quindell will pay RAC £18.5m to buy out its stake and license certain RAC intellectual properties (such as collision detection). This is offset by RAC’s £15m cash payment to Quindell to buy back its brand licence, customers and sales pipeline.
Quindell said the restructure would improve the group’s cash flow by about £10m in 2014 and £20m in 2015
Chairman Rob Terry said: “The relationship between RAC and Quindell remains strong and we will continue to work closely together in key areas, including in the servicing of claims arising from RAC’s connected car offering and potentially through the Ingenie brand. These revised terms are in the best interests of both companies.
“Quindell has some exciting new contracts in the telematics and connected car space and is confident of achieving its targets in this area. The board continues to have confidence in its previous guidance in respect of cash and profitability for 2014 and beyond.”
RAC chief executive Chris Woodhouse said: “We continue to have a strong relationship with Quindell as a key partner and intend to continue to work closely in the connected car space as well as through our on-going claims outsourcing and technology arrangements, which have been of significant benefit to both parties.
Quindell had increased its target for telematics subscribers to 10-12 million from four million in April as a result of the deal, and said today it was still confident in hitting that target by 2019/20.
The London-listed firm’s shares slumped this year after criticism about its business model by Gotham City Research.