Elkland, United States, Dec 24, 2019, 09:30 /Comserve / -- Asbury Automotive Group, Inc. (NYSE: ABG) entered into an agreement to acquire some of the assets of Park Place Dealerships, a well-known luxury dealer group for USD 1 billion through a cash transaction that does not include vehicle inventory.
Asbury Automotive Group, Inc. (NYSE: ABG) entered into an agreement to acquire some of the assets of Park Place Dealerships, a well-known luxury dealer group for USD 1 billion through a cash transaction that does not include vehicle inventory.
Asbury’s President & Chief Executive Officer David Hult stated as follows: “Park Place is highly regarded as one of the best and most efficient operators of luxury stores in the industry. Their portfolio of stores comes with a strong base of loyal clients and 2100 long-term team members throughout the high growth Dallas/Fort Worth market. This acquisition will transform our total portfolio to 50% luxury stores and add approximately USD 2 billion in expected annualized revenues.”
Park Place possesses a sizeable volume of distinctive portfolio of luxury dealerships with premier real estate. Park Place’s franchise in the country comprise of primary stores that are ranked in terms of volume and include Porsche, Bentley, Mercedes-Benz. Additionally, Jaguar/Land Rover store and Volvo stores come within the top 20 rankings.
Through this transaction, Asbury’s geographic mix is set to raise the geographic mix of Asbury to a little higher than 30% of revenue that is gained from luxury brands. The revenue margins arising from luxury segment have been strong and stable and they have been able to withstand any setbacks, as they run on a much higher and solid margins. Further, they have a lesser number of dealers in the country and benefit from obtaining a higher portion of gross profit that arises from parts and service.
Large percentages of revenues for Park Place have been mainly arising from dealerships comprising of Mercedes Benz, Lexus and Jaguar/Land Rover. About 17 new vehicle franchisees being part of operating assets were acquired.
The transaction is slated to be completed by the first quarter of 2020 and is subject to the customary conditions that are to be fulfilled as part of the deal. The price involved in the acquisition includes USD 215 million incurred towards real estate and leasehold improvements and USD 785 million as forming part of goodwill. Additionally, fixed assets and parts constituted about USD 30 million. The transaction is anticipated to bring in a lot of synergies in the next few years with both companies coming together. The returns on investment is believed to exceed the cost of capital invested over time and is expected to generate substantial earnings to shareholders.
The funding for the transaction is expected to come in through already existing credit facilities of Asbury, cash flow arising from operations and already committed financing arrangements. Before closing the deal, the secured committed financing has been secured by Asbury that is anticipated to be replaced with permanent financing. The transaction is believed to help maintain a strong credit profile for Asbury, given the progressive nature of the deal, although the transaction may witness a jump over and above the leverage range targeted by the company. Asbury Automotive Group has managed to secure the committed financing for the transaction from BofA Securities, that is currently the financial advisor of the group.
Independent Tech & news media Writer
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