Almost a month after the announcement,
Penske Automotive Group, Inc.
) completed the acquisition of Western Star Trucks Australia Pty
Ltd. from Australia-based Transpacific Industries Group Limited
last week. Western Star distributes commercial vehicles, their
spare parts and aftermarket support in Australia, New Zealand and
some parts of Southeast Asia.
Penske paid $200 million of purchase consideration from cash
flow from operations and borrowings under its credit and
floorplan financing facilities. The consideration includes $67
million for target working capital required for vehicle
inventory, parts and other assets. However, the amount is subject
to a closing adjustment, which is expected to be finalized within
Penske revealed that its third-quarter 2013 results will
likely include acquisition related costs of 2 cents a share.
However, excluding this cost, the company projects an annualized
proforma income of 10-14 cents per share from the
Western Star is among the top three names in heavy duty trucks
in Australia. It has affiliation with Daimler Trucks North
). The company has a big and established dealer network in
Australia and New Zealand and offers growth opportunities to
While Penske will take over Western Star, the latter will be
managed by its existing management team. Though the acquisition
is expected to add to the company's revenues and earnings, rising
competition is likely to put pressure on the margins.
Penske faces tough competition from other franchised
automotive dealerships, private market buyers and sellers of used
vehicles, Internet-based vehicle brokers, national and local
service and repair shops and parts retailers and automotive
manufacturers. Rising competition together with increasing price
transparency will lead to lower selling prices and act as
headwinds for the company.
Penske currently carries a Zacks Rank #1 (Strong Buy). Other
companies worth considering in the same industry are
Asbury Automotive Group, Inc.
Lithia Motors Inc.
). Both these companies carry a Zacks Rank #1 (Strong Buy).
ASBURY AUTO GRP (ABG): Free Stock Analysis
DAIMLER AG (DDAIF): Get Free Report
LITHIA MOTORS (LAD): Free Stock Analysis
PENSKE AUTO GRP (PAG): Free Stock Analysis
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