Peter Warren Automotive buys Penfold Motor Group for $104m to enter Victorian car dealer market

Peter Warren Automotive will enter the Victorian car dealer market through its purchase of a Melbourne family’s dealer network for $104m.

Peter Warren executive director Paul Warren oversaw the listing of the company started by his father decades ago earlier this year. Now, it is stepping into the Victorian car dealer market with its acquisition of Penfold Motor Group for $104m. Picture: John Feder

Peter Warren Automotive is pushing forward with its pursuit to consolidate the fractured car dealership market, inking a $100m-plus acquisition deal that will see it expand into Victoria as demand for new cars continue to outpace supply.

The dealer group – owned and operated by Sydney’s Warren family until its listing earlier this year – on Monday said it had struck a cash and scrip deal to acquire Melbourne’s privately-held and family run Penfold Motor Group for around $104m.

The news sent Peter Warren’s shares up 6.7 per cent to $3.20 in a slightly lower market by mid-afternoon.

The deal, which is expected to be completed in December, will see Penfold’s owners the Johnstone family receive $88m in cash and $16m in newly issued Peter Warren shares in exchange for its 10 dealerships in South and East Melbourne.

It will also see Peter Warren’s footprint grow to 82 dealerships across Australia’s eastern seaboard.

But the Johnstone family won’t cease operating the business it has helmed since 1964, with Penfold’s management team headed by Sam Johnstone set to stay on under Peter Warren’s ownership.

Peter Warren chief executive Mark Weaver said this “hub and spoke” growth strategy was behind the group’s 2017 push into Queensland through the acquisition of the family-run Frizelle Automotive Group, as local knowledge was indispensable in powering growth in new markets.

“We came to market suggesting that we would be a consolidator in this market, we thought the market is ripe for consolidation,” Mr Weaver said.

“We are pursuing an eastern seaboard strategy, and so this is a fairly large part of that puzzle in terms of expanding into a new space.

“The Johnstone family has done a great job of building out a centralised model, and we think this is a fabulous hub for us to grow deeper into that area.”

Penfold employs around 330 staff and generated revenue of $354m last financial year, with showroom closures due to lockdown costing the business around $60m.

Mr Weaver said its stable of brands which include Audi, Mazda, Volkswagen, Hyundai and Suzuki align with Peter Warren’s existing portfolio, smoothing out the integration of the two companies.

He added he was confident Penfold would perform well as Victoria emerged out of lockdown, with the pent-up demand effect in NSW inspiring the group to lift half-year before tax profit guidance from $28m to $32m-$34m.

“There’s certainly been an immediate bounce-back, and that’s probably outperformed expectations, which is great,” he said.

“We are looking for a familiar pattern there out of Victoria as well, as they emerge out of lockdown.”

Like many businesses, Peter Warren adapted to lockdowns by boosting its digital and effectively implementing click and collect purchase options as its car yards were forced shut.

Mr Weaver said going forward the group would prioritise engaging in the physical and digital channels “simultaneously” to manage a sustained and heightened demand for new vehicles as the economy reopens.

But Peter Warren will also have to balance the impact of new car supply shortages created by global shipping disruptions and a lack of microchips needed to manufacture modern vehicles.

The dearth in supply saw new car sales plunge 8 per cent in October while used vehicle prices spiked as consumers turned to the second-hand market to meet demand.

Mr Weaver said that while Peter Warren’s sales weren’t as impacted due to adequate stock levels for some brands, the shortage would likely persist into next year.

“There are some brands at the moment that have got adequate supply and they are able to feed the market, there are others that have got six, eight months waiting periods,” he said.

“But as a general rule I think we expect supply to be tight well into 2022.”