What: Shares in leading car dealership Automotive Holdings Group Ltd (ASX:AHG) have soared around 8% on Thursday morning to $4.66, after the company released an announcement to the ASX titled 'CEO Transition'.
The announcement stated that Chief Executive Officer (CEO) Mr Bronte Howson who has held the top position at Automotive Holdings for over 17 years is set to transition to retirement.
During Mr Howson's tenure, the share price has increased significantly – up 322% since November 2005 – and has recorded a total shareholder return of 13.7% per annum over the past decade.
Automotive Holdings also announced that stepping in to replace Mr Howson will be Mr John McConnell. Mr McConnell's most recent role was as Financial Director at UK-based global automotive distributor and retailer Inchcape.
So What: Given the superb performance of the group under Mr Howson's investors could rightly be wondering why the market has sent the share price higher today.
The answer is likely to be that the market is guessing that a changing of the guard could lead to a reassessment of the group's underperforming refrigerated transport division which many analysts regard as a distraction from the company's core competencies.
In other words, this underperforming division could find itself on the chopping block under a new CEO.
Also watching the CEO changes closely will be peer AP Eagers Ltd (ASX: APE) – which sits on the share register with a strategic 19.9% stake.
Now What: Investor attention on this sector is bound to heat up in coming months with the listed automotive dealership space becoming increasingly crowded. In early May MotorCycle Holdings Ltd (ASX: MTO) floated on the ASX, while a potential float of European brand car dealership Autosports Group is also being touted.
Given the large number of small operators in the dealership space, the sector is considered ripe for further consolidation. This should bode well for long-term acquisitive growth amongst the larger players and could make it a sector worth taking a closer look at.
