Asbury Group, the US-based new car retailer and the 7th largest group in the country, announced recently it entered into an asset purchase agreement to purchase the ten dealerships along with 17 new car franchises from all around Texas from Park Place Dealerships.
This purchase will help Asbury expand its luxury car revenue from 33% to 50% and increase the group's revenue from the Texan market to around 36%. The company stated that the market in Dallas has a 30% higher penetration of new, luxury car sales when compared to the rest of the country.
"We truly believe Park Place will transform our company long term," Asbury CEO David Hult recently told analysts.
Hult also stated that the purchase would help to improve the company's margins, creating around $20 million in savings during the next three years and increase annual revenue by 30%, to $9 billion. He also expects the acquisition to improve the group's financial and insurance revenues and increase gross profits from parts and services from 48 to 50%. He also believes the group might see growth in auction or subscription services that were part of the deal.
The purchase is expected to close by March and needs to be approved by manufacturers and regulation officials. If approved Asbury will be buying three Mercedes dealerships, two Jaguar-Land Rover dealerships, two Lexus stores, one Porsche dealership, one Volvo store, and a Park Place Premier Collection which offers McLaren, Karma, Maserati, Bentley, and Rolls-Royce vehicles.
Ken Schnitzer, the Chairmen of Park Place, started the company back in 1987 and said that the choice to sell his dealership wasn't a simple one.
"I am extremely proud of what we have accomplished and the culture we have built," Schnitzer, 66, said in a statement. "I will keep my hand in the automotive industry by retaining two dealerships and a body shop in Grapevine."
The Presidio Group from San Francisco, the investment banking company representing Park Place, had its CEO talked about how serious Asbury has been for the past three months about purchasing the Park Place dealership.
"There were several other interested potential buyers, all of whom were qualified to both purchase it and integrate it and operate it," Cobb said. He could not identify other suitors because of nondisclosure agreements.
"It seemed like a very good fit for where Park Place has been and is today," Cobb said recently. "And they seem like excellent stewards of the Park Place brand, its stores, its employees and, ultimately, its customers."
Asbury has been focused on growing its dealership portfolio and had already bought four dealerships, a store, and a collision center from Bill Estes Automotive around Indianapolis and in Thorton, Colorado. This purchase added around $425 million in revenue per year and cost the company $210 million.
The company stated that the Park Place acquisition will include around $215 million in real estate and leasehold improvements and around $30 million in parts and other assets. Asbury said it would pay for the purchase using credit, current cash flow, and financing.
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