COVID-19 Could Scuttle Sale of Luxury-Brand Group

Asbury Automotive Group indicates it is considering calling off its previously announced $1 billion acquisition of the Dallas-based Park Place Dealerships luxury-brand group in light of the business disruption caused by the COVID-19 pandemic.

“In light of these developments, the company and its board of directors intends to continue to evaluate its alternatives with respect to the previously announced acquisition of substantially all of the assets of the business of the Park Place Dealership family of entities,” Asbury says in a filing Monday with the Securities and Exchange Commission.

“While the Company does not presently intend to terminate its obligations under the Asset Purchase Agreement, any such termination by the company would result in total fees and expenses of up to approximately $30 million, including the termination fee described in the Asset Purchase Agreement and financing and other related transaction expenses,” Asbury says.

Asbury, based in Duluth, GA, announced Dec. 12 it would 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.

Ken Schnitzer, founder and chairman of Park Place Dealerships, said in December he would retain ownership of two dealerships, one each for Mercedes-Benz and Porsche, and a body shop, all in Grapevine, TX, outside Dallas.

At the time, Asbury said three Park Place dealerships were among the Top 10 volume U.S. dealerships for the Mercedes-Benz, Porsche and Bentley brands. Asbury said then that the purchase price represented a premium of about 10 times pretax earnings of $100 million annually.

Asbury says in its SEC filing it “has yet to experience significant disruption” in its business operations as a result of the coronavirus outbreak, but it expects to experience “some level” of disruption.

“However, the COVID-19 outbreak in the United States remains in its early stages, and we cannot predict the potential future effects of the outbreak on the company’s business or its prospects,” the filing says.

Schnitzer had no comment on Asbury’s Monday SEC filing, a spokesperson says.