Asbury Automotive Group will finally acquire assets from luxury dealer group Park Place after an unsuccessful run at the deal in the first quarter, President and Chief Executive David Hult told Auto Finance News.
“Strong May and June performance, along with cost restructuring efforts, have driven higher profitability and cash flow, giving us conviction to move forward with a revised Park Place acquisition,” Hult said.
The deal was originally orchestrated in September 2019, and expected to close in the first quarter of 2020. As the COVID-19 pandemic downshifted the auto industry, a drop in Asbury’s March and April sales derailed the $1 billion purchase. Further, the bond Asbury took out to pay for the acquisition expired at the end of April, so the company returned the money and backed out of the deal, costing the auto retailer $11.6 million in termination fees.
However, Asbury has now turned the narrative around with a new agreement, and is set to pay $685 million to Park Place in a smaller deal, along with an additional $50 million for parts, fixed assets and leaseholds, according to an Asbury company statement.
This deal is structured differently from the original one, said Hult. “We’re not buying as many stores, we’re not buying the real estate, we’re leasing it. So it’s a lower price tag, which is huge for us. It’s a more palatable deal for us to weather through these economic times.”
Asbury is on track to acquire 12 Park Place dealerships in the Dallas and Fort Worth markets, along with the Park Place auto auction and two collision centers. Mercedes-Benz and Lexus dealerships make up 38% and 37% of Park Place’s portfolio, respectively. The other 26% of the catalog belongs to Jaguar, Land Rover, Porsche and Volvo.
The acquisition is anticipated to bring Asbury $1.7 billion in annual revenues, Hult said.
“This, to me, is probably the best well run group in the United States that I’ve come in contact with, an impeccable reputation in delivering an unparalleled guest experience,” Hult added. “They have extremely long-tenured employees and they’re a very process-driven company. We think this is value added, not just in the traditional way of adding additional revenue to the company, but actually how much we can learn from how they do business.”
Asbury Automotive Group [NYSE: ABG] was trading at $91.17 per share as of 12:34 p.m. ET, up 6.35% since market open. Asbury has a market capitalization of $1.76 billion.
Originally published on Auto Finance News