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Eagers Automotive (ASX: APE) is in high gear with its dealership overhaul strategy after entering a deal to acquire its ninth property within two months, which will see two Sydney operations relocated to a new site.
Flush with $225 million in cash from the financial services arms of Toyota and Volkswagen, the group formerly known as AP Eagers announced in September it would be acquiring eight properties for $105 million in a bid to reduce occupancy costs at dealerships it had previously leased.
Today the Brisbane-based company has announced it will be using Toyota's financing facilities to buy a property it currently leases in Castle Hill, Sydney from Charter Hall for $76.25 million.
The transaction is due for completion in January, 2021.
Eagers Automotive claims the 43,000sqm property on the corner of Victoria Avenue and Windsor Road is in a prime location but is poorly configured and under-utilised with three extra-large showrooms, 67 service bays and "a number of outdated factory units".
Now that the group plans to own the site, the plan is to optimise the dealership footprint by accomodating up to eight automotive brands while also relocating the Sydney-based operations of EasyAuto123 and Carlins to the site.
These relocations are expected to save the company $2 million in rent annually, while Eagers Automotive expects the acquisition will deliver a $15 million benefit before taking into account any new franchisees or improved operating efficiencies achieved under its Next100 Strategy.
The strategy, focused on ownership of strategic locations to provide the omni-channel retail flexilibity, is a nod to future growth after more than 100 years in existence since the group's founding as E.G. Eager & Son Ltd in 1913.
Eagers Automotive is now a very different company after its 2019 acquisition of competitor Automotive Holdings Group, making it a giant dealership network that currently has a market capitalisation of almost $3 billion.
In July this year the company formally changed its name on the ASX, but kept the same ticker APE.
Today's deal builds on the announced purchase of the following eight properties in September, also from Charter Hall, for $105 million:
- Zupps, Mt Gravatt, QLD (five properties)
- Big Rock Toyota, Balcotta, WA
- South Morang Toyota, VIC
- Sutherland Mazda, Kirrawee, NSW
Through those deals the group aimed to consolidate 10 existing dealerships into eight locations by December 2020, reducing further to six locations by early 2022.
On December 4 Eagers Automotive will hold a general meeting to vote to approve payment for two properties in WA associated with director Michelle Prater.
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