Asbury Automotive Group, one of the nation's largest auto dealership and service companies, has agreed to buy 14 Park Place dealerships in the Metroplex and Austin in a $1 billion all-cash transaction, excluding vehicle inventory, Asbury said Thursday morning.
Asbury and Ken Schnitzer, founder and CEO of Park Place Dealerships, said they expect the sale to close by March.
“The decision to sell the company that I have spent the past three decades building has not been an easy one,” Schnitzel said in a separate release. “But now is the time to enjoy my family and friends, as well as explore new opportunities.”
The transaction includes the Park Place brand and the Mercedes-Benz stores in Dallas, Fort Worth and Arlington; Lexus Plano and Lexus Grapevine; Jaguar/Land Rover DFW; and an Austin location under construction; Porsche Dallas; Volvo, Bentley Dallas; Rolls-Royce Motor Cars Dallas; McLaren Dallas; and Maserati Dallas. Park Place BodyWerks in Dallas and Fort Worth are included in the sale.
Schnitzer will keep the Mercedes-Benz and Porsche dealerships in Grapevine, and the body shop in Grapevine.
The acquisition will add $2 billion in expected annual revenue to Asbury, David Hunt, Asbury's CEO, said in a release. The company posted $6.9 billion in 2018 revenue.
"Park Place is highly regarded as one of the best and most efficient operators of luxury stores in the industry," Hult said. "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." For 2018, 33% of the company's revenue was from luxury sales, the company reported in SEC filings.
Asbury said the purchase will increase its geographic mix to 36% of revenue derived from Texas. The company has dealerships in the DFW, Houston, and Austin areas.
"The luxury segment has historically delivered strong and stable margins that are significantly above those achieved by mid-line import and domestic brands," Asbury said. "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's revenue comprises 38% Mercedes-Benz, 32% Lexus, 11% Jaguar/Land Rover, 7% Porsche, 4% Volvo, and 8% other premier luxury brands, Asbury said.
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, Asbury, based in Duluth, Ga., said. The transaction is subject to customary closing conditions, it said.
"We expect to achieve significant synergies over the next three years through combining Park Place with Asbury," Asbury said.
The purchase price reflects a multiple of 10 times approximately $100 million in annual earnings before interest, taxes, depreciation and amortization, Asbury said.
"These synergies are expected to be realized over the next three years, with incremental profit coming from the Jaguar/Land Rover open point," Asbury said. "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."
Schnitzer started Park Place Dealerships in 1987 with a Mercedes-Benz dealership on Oak Lawn Avenue. Schnitzer built one of the largest luxury dealership groups in the country. In 2005, Park Place Lexus Plano and Park Place Lexus Grapevine were awarded the Malcolm Baldrige National Quality Award by the President George W. Bush in the small business category. Park Place was the first auto dealer to ever win the award. The company employs more than 2,100 people.
“In the last 32 years, there have been many challenges, opportunities, decisions, and risks,” Schnitzer said. “But when you have a great team by your side, you can accomplish anything. The members of Park Place who’ve contributed their ideas and talents to the growth of the company are the best in the industry.”