Citing Pandemic Slowdown, Asbury Automotive Chain Nixes $1 Billion Acquisition

Part of a wave of hunkering down in the auto industry in reaction to the COVID-19 pandemic, Asbury Automotive Group called off its previously announced $1 billion acquisition of the Dallas-based Park Place Dealerships luxury-brand group.

Asbury, based in Duluth, Ga., also upped its borrowing, also in reaction to the pandemic. Asbury is one of the largest automotive retailers in the U.S. Its 2018 revenues were around $6.9 billion. The group has 88 dealerships.

Earlier, Asbury had disclosed on March 16 it was considering calling off the Park Place deal, in light of the general business disruption caused by the coronavirus.

In an SEC filing on March 25, Asbury said it notified Park Place on March 24 that Asbury was terminating the purchase agreement. Asbury disclosed that terminating the agreement would cost it approximately $30 million, including a termination fee, financing, and other expenses.

The deal was originally announced on Dec. 12, 2019. Asbury was to acquire 14 dealerships from Park Place in a cash deal for $1 billion, not counting the cost of inventory, to take effect in the first quarter.

At the time, Asbury CEO David Hult said the acquisition represented about $2 billion in expected annual revenues. Three stores in the Park Place group are among the Top 10 U.S. dealerships for their respective brands, namely Mercedes-Benz, Porsche, and Bentley, Asbury said.

The deal that has now been terminated called for Ken Schnitzer, founder and chairman of Park Place Dealerships, to retain ownership of a body shop and two dealerships, for Mercedes-Benz and Porsche, outside Dallas.

In the March 25 SEC filing, Asbury also said it had increased borrowing. The company said that on March 18, it borrowed an additional $237 million under its revolving credit facility and an additional $110 million, under its used-vehicle floorplan facility.

Asbury said it increased borrowing, “as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak.”