Asbury Automotive Group Inc. said Monday it would "continue to evaluate its alternatives" in regard to its planned $1 billion acquisition of most of Park Place Dealerships amid the coronavirus pandemic that it expects to disrupt its business to some degree.
The announcement in a regulatory filing came after Asbury sold all five of its Mississippi dealerships, the Gray-Daniels Auto Family, last week to McLarty Automotive Group, a move chairman and founder Mark McLarty says will thrust the smaller dealership group into the top 25 in the country.
Terminating the Park Place deal would cost the company about $30 million in fees and expenses, the nation's seventh-largest new-vehicle retailer said in a regulatory filing, adding that it "does not presently intend to terminate its obligations under the asset purchase agreement."
Asbury announced in December that it would buy 10 luxury stores in Texas with 17 new-vehicle franchises — including many top national performers in the Dallas and Fort Worth markets. The transaction was slated to close by the end of March.
The company, in the filing, said in response to investor inquires that the novel coronavirus has not caused any "significant disruption" to its operations so far, though it does expect to experience some level of disruption.
"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," Asbury said in the filing with the U.S. Securities and Exchange Commission.
At least one U.S. dealership, not owned by Asbury, has been forced to close for a few days because of the virus. Toyota of Kirkland in Washington state had to close for several days for deep cleaning and disinfecting this month after a sales-side employee tested positive for the coronavirus. The dealership has since reopened.
And some U.S. dealerships told Automotive News over the past week that they have seen foot traffic, service and/or sales slow amid the outbreak. On Thursday, Asbury sent a message to customers on the measures the retailer is taking to prevent the spread of the virus, among them a moratorium on handshakes, increased sanitization efforts and a prohibition on dealership employees coming to work if they have been exposed to the virus or are feeling ill. All nonessential business travel has been halted as well, Asbury said.
A spokeswoman for Park Place Dealerships declined to comment Monday. Asbury said it would not comment beyond the filing.
The Gray-Daniels Auto Family, which consists of Gray-Daniels Toyota, Gray-Daniels Nissan Brandon, Gray-Daniels Chevrolet, Gray-Daniels Nissan North, Gray-Daniels Ford-Lincoln and one collision center, generated approximately $334 million in annualized revenue, Asbury said in its fourth-quarter filing.
McLarty plans to keep the store names. The group said in a news release that it hopes the stores will generate about $400 million in annual revenue, growing its total annual revenue to $1.7 billion. Founded in 2014, McLarty Automotive has 23 stores in the mid South and Midwest.
McLarty has purchased other stores from Asbury over the past five years including four Arkansas stores in 2015. In 2016 it bought the rest of Asbury’s Arkansas store holdings.
Asbury CEO David Hult said on a Feb. 3 call with investors that the Park Place acquisition presented an opportunity for Asbury to sell the Mississippi group to a private capital dealer, and to use the cash generated from the sale reinvest in more accretive areas for the company.
“We think the acquisition of Park Place, what we're doing in Denver, the divestitures in Mississippi, in Atlanta truly make Asbury a stronger company overall, but certainly no one can predict the future,” Hult said on the call.
McLarty Automotive, of Little Rock, Ark., ranks No. 30 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 25,449 new vehicles in 2018.
Asbury, of Duluth, Ga., ranks No. 7 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 105,275 new vehicles in 2018. It retailed 82,377 used vehicles for the same period, ranking it No. 9 on Automotive News' list of the top 100 retailers in used-vehicle sales.