TORONTO -- An Edmonton, Alberta, dealership group has filed to establish the first publicly traded group in Canada.
Seeking a listing on the Toronto Stock Exchange, Canada One Auto Group Ltd. plans to lead a trend toward larger dealership groups in that nation.
Canada One was founded by and is 75 percent owned by CEO Pat Priestner. He began selling cars at age 17 in Calgary, Alberta, in the 1970s; was the top Chrysler salesman in the province at 19; and became a partner in a Dodge dealership in his mid-20s.
Bob Clark, who was vice president of sales and service at DaimlerChrysler Canada, joined Canada One as president in 2004.
Starting with Crosstown Chrysler in Edmonton in 1994, Canada One grew slowly but picked up dramatically last year, adding four franchises for a total of 14.
Now it has filed a prospectus with financial regulators to sell units to the public under the name AutoCanada Income Fund.
AutoCanada plans to own and operate the dealerships after it goes public.
Although Chrysler group products account for 95 percent of Canada One's new-car sales, AutoCanada:
- Has signed a letter of intent to buy a Ford dealership.
- Has agreed with Hyundai and two unnamed manufacturers to open four new stores, three by the fall and the fourth by the summer of 2007.
- Is continuing talks with several other import and domestic brand dealers about buying their stores.
Canada One's revenues last year were $627.8 million Canadian or about $547.6 million U.S. at current exchange rates.
Canada One is betting that the consolidation that has occurred in the United States is heading across the border.
The average Canadian dealership is much smaller than its U.S. counterpart - 450 vehicles sold a year vs. 750, the prospectus says. Nearly 70 percent of Canadian dealers have just one store.
Unclear succession plans
Many automobile dealers are approaching retirement age without clear succession plans and are likely to seek opportunities to sell, the prospectus says.
Canada One also has an internal reason for changing its business model. It's running out of room to grow as a Chrysler company because DaimlerChrysler Canada limits the amount of sales any one dealership group can control.
Canada One is limited to 5 percent of Chrysler group new-vehicle sales in Canada and is at 4.4 percent.
But Chrysler isn't worried by the dealership group's growth; DaimlerChrysler Finance is advancing a $43 million line of credit to pay for acquisitions, and AutoCanada plans to use its new ownership units to buy stores from dealers who want out.
The company is hoping to squeeze a lot more money out of its acquisitions, as it has done before.
"For the five acquisitions we completed in 2002 and 2003, we have increased total gross profits by approximately 82 percent from the year preceding the acquisition to our 2005 fiscal-year end," the prospectus says.
Canada One made a gross profit of $66.6 million U.S. in 2005, up from $42.7 million in 2003. It paid its shareholders more than $26 million over the past three years. Those payments will stop once it becomes a trust, which will boost the bottom line.
Canada One has filed to sell up to 80 percent of the company; the share sold will be revealed later.