UnitedAuto Group is quietly positioning itself for a new round of car dealership Pac-Man.
The Detroit-based dealership group is close to completing negotiations with its lenders to increase UnitedAuto's borrowing power for money to make acquisitions by $250 million, or more than 60 percent, to a total of about $640 million, according to documents filed last week with the Securities and Exchange Commission.
UnitedAuto operates more than 100 dealerships, according to the 2000 Automotive News Market Data Book.
With forecasts for a downturn in auto sales in 2001, it's likely that asking prices for dealerships will drop as well.
The company has convened a shareholders meeting at its offices in Secaucus, N.J., on Dec. 13 to ratify part of the new credit agreement and to double the number of authorized shares of UnitedAuto stock - from 40 million to 80 million - the documents said. The money and the additional shares can be used to pay for acquisitions with cash and/or stock, the company said.
The measures are a done deal as far as shareholder approval is concerned, since UnitedAuto directors and executive officers already control about 58 percent of the shareholder vote.
Chairman Roger Penske and his partners control about 42 percent. As part of the proposed increase in UnitedAuto's credit lines, the company will issue, and Penske will buy, an additional 2.1 million shares for $23 million. That will boost his stake to 45.6 percent.
UnitedAuto is the nation's third-largest dealership group with $4 billion in sales, according to Automotive News' 1999 rankings of the top 100 groups.
UnitedAuto's lenders made Penske's additional investment part of the deal in order to increase UnitedAuto's borrowing power, according to records released by the SEC.
Under its present credit agreement, UnitedAuto can borrow up to about $586 million, said Jim Davidson, executive vice president of finance. Of that, about $390 million is available for acquisitions, working capital and other purposes, he said.