Asbury Automotive Group Inc. spent $2.7 million throughout the fourth quarter on “a major acquisition that didn’t materialize,” the corporate mentioned Thursday.
Asbury’s sale of 9 North Carolina shops within the fourth quarter was additionally partly agreed to in anticipation of the unconsummated buy, CEO David Hult informed analysts and buyers on a name.
Asbury didn’t specify a cause for the “important” deal’s lack of completion, and it was unclear from Hult and Asbury’s feedback if the auto retailer had deserted that transaction fully. Asbury additionally didn’t specify what bills consumed the $2.7 million apart from for “deal diligence.”
On the decision, Morningstar Inc. analyst David Whiston requested for clarification on what Asbury thought of a “giant” or “important” acquisition in mild of the group’s buy of Larry H. Miller Dealerships in December 2021. That $3.2 billion transaction included Asbury buying 61 franchised and used-only shops and finance-and-insurance product supplier Whole Care Auto.
Hult mentioned most acquisition prospects — together with this goal — weren’t the dimensions of Larry H. Miller. “They’re extraordinarily uncommon,” Hult mentioned of such megadeals.
On a scale between a single retailer and a bunch with 60 dealerships, “this in all probability would have been someplace in the course of the 2,” Hult mentioned of the latest prospect. The goal was “very wholesome” in measurement, however not as giant as Larry H. Miller, he mentioned.
Hult mentioned Asbury’s pursuit of that acquisition additionally contributed to his Duluth, Ga., group’s choice to promote 9 North Carolina dealerships, representing about $590 million in annual income, to Hudson Automotive Group of Charleston, S.C. Asbury mentioned it obtained $322 million in proceeds from the deal.
“The divestiture of the North Carolina shops was partly because of the anticipation of the brand new acquisition approaching and ensuring we maintained a stability of money move and stored our leverage correct,” Hult mentioned.
When the anticipated deal did not come up, Asbury was already below contract to promote the North Carolina dealerships, Hult mentioned.
Asbury desires to develop its annual income to $32 billion in 2025 and has mentioned acquisitions might be a part of the way it will get there. It generated $15.4 billion in income final 12 months.
Asbury had $1.5 billion in liquidity and a debt ratio of 1.7 occasions earnings on the finish of the fourth quarter, and CFO Michael Welch mentioned Thursday the corporate’s entry to money and low debt gave it a big capability to buy dealerships or purchase again inventory. He known as it a “good place for 2023.”
Asbury purchased about 1.6 million shares of its personal inventory for a mixed $300 million in 2022, and its board has accredited the corporate to purchase again $200 million extra in inventory.
Asbury ranks No. 5 on Automotive Information‘ most up-to-date checklist of the prime 150 dealership teams primarily based within the U.S., retailing 109,910 new automobiles in 2021.