DULUTH, Ga., Dec. 12, 2019 /PRNewswire/ -- Asbury Automotive
Group, Inc. (NYSE: ABG), one of the largest automotive retail and
service companies in the U.S., entered into a definitive agreement
to acquire certain assets of Park Place Dealerships, one of the
country's largest and most prominent luxury dealer groups, for
$1 billion in an all-cash
transaction, excluding vehicle inventory.
"Park Place is highly regarded as
one of the best and most efficient operators of luxury stores in
the industry," said David Hult,
Asbury's President and Chief Executive Officer. "Their portfolio of
stores comes with a strong base of loyal clients and 2,100
long-term team members throughout the high growth Dallas/Fort Worth market. We are also excited
to grow our presence in Austin,
Texas with a Jaguar/Land Rover open point, which is another
high growth luxury market. This acquisition will transform
our total portfolio to 50% luxury stores and add approximately
$2 billion in expected annualized
revenues."
Park Place has a unique portfolio
of high volume, award winning luxury dealerships with premier real
estate. Three stores are ranked among the top 10 stores in volume
in the country amongst their franchise: Mercedes-Benz, Porsche, and
Bentley. In addition, the Jaguar/Land Rover store and both Lexus
stores are ranked in the top 15, and the Volvo store is ranked in
the top 20.
This transaction will increase Asbury's geographic mix to 36% of
revenue derived from the Texas
market, and it will transform our overall portfolio to
approximately 50% of revenue derived from luxury brands. The luxury
segment has historically delivered strong and stable margins that
are significantly above those achieved by mid-line import and
domestic brands. Luxury stores tend to be more resilient in
downturns, and they tend to have higher and more stable margins,
fewer dealers nationwide, and a higher portion of gross profit from
parts and service.
Park Place has a highly
attractive mix of large dealerships with revenue comprised of 38%
Mercedes-Benz, 32% Lexus, 11% Jaguar/Land Rover, 7% Porsche, 4%
Volvo, and 8% other premier luxury brands.
The operating assets acquired include 17 new vehicle franchises,
15 of which are located in the attractive Dallas/Fort Worth market: 3 Mercedes-Benz, 2
Lexus, 2 Jaguar, 2 Land Rover, 1 Porsche, 1 Volvo, 1 Bentley, 1
Rolls Royce, 1 McLaren, 1 Maserati, 1 Karma, and 1 Sprinter.
Included in the 17 franchises is a Jaguar/Land Rover open point in
Austin, Texas that is expected to
open late in the first quarter of 2020.
Financial Impact
The purchase price includes $785
million of goodwill, approximately $215 million for real estate and leasehold
improvements, and approximately $30
million for parts and fixed assets. The transaction is
expected to close in the first quarter of 2020, and is subject to
customary closing conditions.
We expect to achieve significant synergies over the next three
years through combining Park Place
with Asbury. The purchase price reflects a 10x multiple on
approximately $100 million of EBITDA,
including expected run-rate synergies of at least $20 million. These synergies are expected to be
realized over the next three years, with incremental profit coming
from the Jaguar/Land Rover open point. In addition, we expect
$11 million in annual cash tax
savings from goodwill amortization with a present value of
approximately $90 million. In all, we
believe the returns on this investment well exceed our cost of
capital and should deliver substantial value to our
shareholders.
The acquisition of Park Place, assuming a closing date of
March 31, 2020, is expected to be
accretive to 2020 earnings per share by approximately $1.00 to 1.25, excluding the impact of
transaction costs. Asbury also expects to incur pre-tax costs
associated with the transaction of approximately $0.05 to $0.10 per
share in the fourth quarter of 2019.
This transaction is expected to be funded through a combination
of Asbury's existing credit facilities, cash flow from operations,
and committed financing arrangements. Asbury has secured
committed financing, which it expects to replace with permanent
financing prior to closing. Although the transaction is
expected to initially take us above our targeted leverage range, we
believe that given the accretive nature of the deal, the strength
of our business, and the combined free cash flow generation, we can
maintain a solid credit profile and deleverage to under 3.0x by
2022.
BofA Securities served as financial advisor to Asbury Automotive
Group and is providing committed financing for the transaction;
Hill Ward Henderson and Jones Day
acted as legal counsel to Asbury Automotive Group. The Presidio
Group served as financial advisor to Park Place Dealerships and
Locke Lord acted as legal counsel to
Park Place Dealerships.
Additional information regarding the transaction will be
provided during a conference call on December 12, 2019 at 9:00
a.m. Eastern Time. The conference call will be
simulcast live on the internet and can be accessed at
www.asburyauto.com/company/investor-relations. A replay will
be available at these sites for 30 days.
In addition, a live audio of the call will be accessible to the
public by calling (800) 367-2403 (domestic), or (334) 777-6978
(international); passcode - 5140215. Callers should dial in
approximately 5 to 10 minutes before the call begins.
A conference call replay will be available two hours following
the call for seven days, and can be accessed by calling (888)
203-1112 (domestic), or (719) 457-0820 (international); passcode -
5140215.
About Asbury Automotive Group, Inc.
Asbury Automotive Group, Inc. ("Asbury"), a Fortune 500 company
headquartered in Duluth, GA, is
one of the largest automotive retailers in the U.S. Asbury
currently operates 88 dealerships, consisting of 107 franchises,
representing 31 domestic and foreign brands of vehicles.
Asbury also operates 25 collision repair centers. Asbury
offers customers an extensive range of automotive products and
services, including new and used vehicle sales and related
financing and insurance, vehicle maintenance and repair services,
replacement parts and service contracts.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are statements other than
historical fact, and may include statements relating to goals,
plans, market conditions and projections regarding the expected
benefits of the proposed acquisition, management plans, projections
and objectives for future operations, scale and performance,
integration plans and expected synergies therefrom, the timing of
completion of the proposed acquisition and Asbury's financial
position, liquidity, results of operations, market position and
dealership portfolio. These statements are based on
management's current expectations and beliefs and involve
significant risks and uncertainties that may cause results to
differ materially from those set forth in the statements.
These risks and uncertainties include, among other things, the
occurrence of any event, change or other circumstances that could
give rise to the termination of the definitive agreements; the risk
that the necessary manufacturer approvals may not be obtained; the
risk that the necessary regulatory approvals may not be obtained or
may be obtained subject to conditions that are not anticipated; the
risk that the proposed acquisition will not be consummated in a
timely manner; risks that any of the closing conditions to the
proposed acquisition may not be satisfied or may not be satisfied
in a timely manner; risks related to disruption of management time
from ongoing business operations due to the proposed acquisition;
failure to realize the benefits expected from the proposed
acquisition; failure to promptly and effectively integrate the
acquisition; and the effect of the announcement of the proposed
acquisition on the operating results and businesses of Asbury and
Park Place Dealerships and on their ability to retain and hire key
personnel, maintain relationships with suppliers; market factors;
Asbury's relationships with, and the financial and operational
stability of, vehicle manufacturers and other suppliers; acts of
God or other incidents which may adversely impact supply from
vehicle manufacturers and/or present retail sales challenges; risks
associated with Asbury's indebtedness (including available
borrowing capacity, compliance with its financial covenants and
ability to refinance or repay such indebtedness on favorable terms
or at all); Asbury's relationships with, and the financial
stability of, its lenders and lessors; risks related to competition
in the automotive retail and service industries; general economic
conditions both nationally and locally; governmental regulations;
legislation; adverse results in litigation and other proceedings;
and Asbury's ability to execute its digital initiatives and other
operational strategies, to leverage gains from its dealership
portfolio, to capitalize on opportunities to repurchase its debt
and equity securities or purchase properties that it currently
leases, and to stay within its targeted range for capital
expenditures. There can be no guarantees that Asbury's plans
for future operations will be successfully implemented or that they
will prove to be commercially successful.
These and other risk factors that could cause actual results to
differ materially from those expressed or implied in our
forward-looking statements are and will be discussed in Asbury's
filings with the U.S. Securities and Exchange Commission from time
to time, including its most recent annual report on Form 10-K and
any subsequently filed quarterly reports on Form 10-Q. We
undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise.
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SOURCE Asbury Automotive Group, Inc.