Peter Warren Automotive (ASX:PWR) share price in view amid $104m acquisition

Peter Warren Automotive adds another piece to its dealership empire…

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a smiling man leans out his car window, car keys in hand.

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The Peter Warren Automotive Holdings Ltd (ASX: PWR) share price is in focus on Monday. This comes as the new and used car dealership operator announces its expansion through a substantial $104 million acquisition this morning.

At the time of writing, shares in the company are sitting at $3 ahead of the market opening today.

Let’s walk through the car dealerships’ latest announcement.

Expanding Melbourne presence with Penfold Motor

In its first acquisition since commencing its listed life on the ASX, Peter Warren Automotive has made a land grab for a Melbourne-based car dealership. The move will see the 63-year-old company explore outside its current bounds of Queensland and New South Wales.

According to the release, Peter Warren has agreed to acquire 100% of Penfold Motor Group. The automotive dealership being acquired is a family-owned and operated outfit that began its operations in 1964. Currently, Penfold has 10 leasehold operations sprawled across South and East Melbourne.

Additionally, Penfold Motor Group’s portfolio of brands includes Audi, Mazda, Volkswagen, Hyundai, and Suzuki. These recognisable vehicle brands align with those that are within Peter Warren Automotive’s offerings.

In terms of the business financials, Penfold recorded $354 million in revenue in the FY21 full year. This metric was achieved despite the significant disruptions imposed by lockdowns at the fault of COVID-19. Furthermore, the deal is expected to be double-digit earnings per share (EPS) accretive on a pro forma FY22 basis.

To fund the acquisition, the company will be providing $88 million in cash. This will be partly from existing cash reserves and partly through the drawdown of new debt facilities. Lastly, a $16 million portion of the total $104 million consideration will be a scrip component.

For the purpose of the scrip deal, 5.2 million new shares will be issued to shareholders of Penfold Motor Group at $3.02 per share.

Peter Warren Automotive share price snapshot

Peter Warren Automotive was listed on the ASX back in April of this year. Despite posting revenue and earnings growth in its maiden full-year result on the public market, shares in the company have underperformed.

Since listing, the Peter Warren Automotive share price has fallen 13.3%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has gained 6% over the same time period.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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