Vehicle dealer, Eagers Automotive is continuing to break up and sell off assets unwanted from the takeover last year of rival Automotive Holdings (AHG).
The sale announcement came days after an earnings upgrade was issued by the company last Friday.
Eagers has already sold off AHG’s cold storage and logistics business in march for $100 million and yesterday announced that it had sold AHG’s Sydney based Daimler trucks operation for $108 million.
The cold storage business went to an Australian private equity business while the truck business has been bought by an American company.
Eagers has entered an agreement with privately-owned US truck distributor Velocity Vehicle Group (VVG) for it to acquire the Daimler truck business along with a property in Milperra, NSW.
VVG operates 36 dealerships across the southwest USA and is an existing partner with Daimler. The sale is expected to deliver Eagers a net gain before tax of between $32 million and $36 million.
“The divestment of our Daimler truck operations represents another key step in the ongoing simplification of our automotive retail business. VVG will be a great home for the Daimler truck business and offers an exciting future,” Eagers chief executive Martin Ward said in a statement to the ASX.
The Eagers Automotive Daimler truck business employs around 650 people at metropolitan and regional locations across Australia, including Brisbane, Newcastle, Sydney, Melbourne, Adelaide and Perth.
Eagers Automotive will continue to own and operate its existing Webster Truck and Isuzu Truck businesses, which are currently part of the automotive retail division. Following completion of the transaction, the Hino and Iveco operations will be incorporated into the automotive retail division, removing the requirement for a standalone National Trucks division. That means the standalone AHG truck operation will be no more.
The transaction will be subject to approval by the Foreign Investment Review Board.
Monday’s statement followed a trading update on Friday of last week where Eagers revealed that thanks to a full year’s contribution from the AHG takeover, it was looking at a substantial rise in revenue and earnings forits 2020 financial year which ends on december 31.
Eagers told the ASX that it expects to deliver an underlying operating pre-tax profit from continuing operations “in the range of $195 to $205 million for 2020, compared to $100.4 million for the prior corresponding period. The guidance reflects the first full year of trading for the enlarged company following the transformative merger with Automotive Holdings Group (AHG).”
“Vehicle sales have continued to rebound strongly from the historical lows experienced during April and May 2020 when nation-wide COVID-19 restrictions were in place.
“Customer orders have continued on their strong trajectory and supply constraints caused by global manufacturer factory closures during the June quarter have started to ease as demonstrated by the 12% uptick in national vehicle deliveries recorded during November by VFACTS.
“The industry’s tight inventory position, combined with the company’s cost reduction initiatives implemented following the merger with AHG and in response to COVID-19, have driven Eagers Automotive’s strong underlying trading performance.”
The two major asset sales means the statutory profit will look nice and fat when Eagers reports full year results next February.
No wonder the shares jumped more than 5% to $14.22 yesterday in a market that was up just 17 points.
