Let's hope that if and when computer mogul Michael Dell buys Asbury Automotive Group he doesn't treat the dealerships like laboratories for new-age theories about selling cars.
There are those in the retail world who predict the founder of computer giant Dell might want to experiment in areas that have worked in the computer business, such as just-in-time inventory.
That doesn't pass the smell test.
Why would you invest heavily in an established business -- the sixth largest dealership group in the country -- and risk losing everything on unproven schemes that fly in the face of American car-buying habits?
MSD Capital LP, a private equity fund that manages the capital of Michael Dell and his family, is interested in acquiring publicly held Asbury in a deal that would privatize the dealership group, according to sources in the retail, factory and finance sectors. Asbury went public in March 2002.
An MSD spokesman said the company doesn't comment on current or possible future investments. Timothy Collins, CEO of Ripplewood Holdings, which owns more than half of Asbury's stock, could not be reached. Asbury Vice President Allen Levenson declined to comment on what he called a rumor.
Don't forget this wouldn't be Michael Dell's first foray into the car business. He was an early financial backer of the online buying service CarsDirect, so he must know how the car biz works.
It could be that Dell and MSD just want to diversify the investment portfolio with a strong company in an established business, one that generates healthy cash flow. Or maybe they just want to be in the car business but don't necessarily want a castoff Delphi or Visteon factory.
Asbury reported net income of $61.1 million for 2005 on revenue of $5.54 billion. Last year the company's 89 dealerships retailed 105,521 new and 60,615 used vehicles. Asbury also rang up 7,262 fleet sales.
Asbury's stock has been trading around $20 a share, which yields a market cap of about $650 million. When you add in blue sky, it pushes the purchase price upward of $750 million, according to one estimate, perhaps a lot more, depending on what it takes to buy out the other shareholders.
That sure seems like too big of a stake to gamble on experiments, even for Michael Dell.
You may e-mail Edward Lapham at [email protected]