Penske adds Spain to its overseas roster
No. 2 retailer looks for more U.S. acquisitions
Penske: "Plenty of firepower"
Fresh off the heels of a joint venture in Barcelona, Spain, Penske Automotive Group Inc. will continue to expand with acquisitions in the United States and elsewhere.
"We want to expand globally where we have human capital and people to build these businesses," Chairman Roger Penske told Automotive News. "We started that in the United Kingdom, expanded into Italy and now Spain."
In early July, Penske closed on a venture, to be owned half by Penske Automotive and half by Portugal's Caetano Group, to take over "the entire BMW market for Barcelona," Penske said.
The venture will operate five BMW locations in Barcelona. The deal cost 25 million euros ($33.6 million), with Penske contributing half of that, Penske said.
Spain is one of the five largest markets in Western Europe. Through June, 454,942 vehicles were sold there, up 18 percent from the year-earlier period, according to the Automotive News Data Center.
"So it's a 1 million-unit market today and growing at 15 to 16 percent a year," Penske said.
The company estimates it will realize an additional $200 million in annualized revenue this year from stores it has already added to its stable, whether through acquisitions or new stores in open points. Penske said he expects to add $500 million to $700 million in additional total annualized revenue in 2014, including deals already done.
"We have over $500 million in liquidity so we have plenty of firepower," he said.
"The health of the pipeline is very good," Penske said of the U.S. buy-sell market. He was speaking during a conference call following the release of the retailer's second-quarter results. Net income rose 18 percent from the year-earlier quarter to $73.9 million as revenues jumped 21 percent to $4.41 billion.
Penske sees many stores going on the market because family members do not want to make capital investments in the stores. The diversity and supply of dealerships for sale means there is not a lot of competition with other public retail groups for the same properties.
"Each of us has different markets we're strong in and so we would be focusing on stores where we can add value or have infrastructure in place," Penske said.
"I can't remember the last time I've been in competition with another public trying to buy a dealership."
Penske said he is looking at acquisitions in Australia to expand the company's commercial vehicle business there. In the United States, acquisitions have to be opportunistic in markets where Penske already has operations, he said, to allow the company to benefit from economies of scale.
He said it is unlikely Penske will purchase a big dealership group. That would contrast with Lithia Motors Inc.'s proposed acquisition of DCH Auto Group Ltd.
"With the framework agreements we have with the manufacturers on the luxury end, you're limited with the number of stores you can have in a particular market," he said. "So any big deals would be complicated."
Penske Automotive ranks No. 2 on the Automotive News list of the top 125 dealership groups in the United States with retail sales of 199,795 new vehicles in 2013.
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