By Tess Bennett, Zoe Samios and Anthony Macdonald
Nick Politis was instrumental in Eagers Automotive sealing a $1 billion deal to buy car dealership network CanadaOne, with the billionaire set to tip another $128 million into the company as part of the transaction.
Australia’s biggest car dealership group will buy 65 per cent of the privately owned Canadian operator, with CanadaOne founder Pat Priestner retaining the remaining 35 per cent of the company he started in 1993.
Eagers chief executive Keith Thornton said Politis, who owns almost 30 per cent of the business, was critical to securing its first major overseas expansion, attending the first meeting with CanadaOne in a hotel room over four hours.
“There’s not much Nick hasn’t seen in the auto industry over a long and successful career,” Thornton said. “But that first four-hour meeting with Pat and his team, listening to the way they run their business … Nick looked at me and said ‘that’s probably the best meeting I’ve had with a dealer group in 50 years’.”
Politis is a director of Eagers Automotive and also chairman of the Sydney Roosters rugby league club. He first bought a stake in Eagers in 2000 after the death of majority shareholder Alan Piper.
The Sydney Morning Herald reported Politis was in Canada last month for a business trip when he was forced to deal with a drug-related incident involving Roosters player Victor Radley.
“Nick’s been super engaged in this,” Thornton told The Australian Financial Review. “One of the great things that we’ve been able to leverage is the fact that Nick has owned dealerships in the US, in the UK, and in Europe over his career.
“A lot of the reservations or some of the commentary we’d had, Nick was much more relaxed about it, having real-world experience.”
Eagers will pay $658 million in cash for the stake, to be largely funded by a $502 million equity raising and a $386 million issue of Eagers shares to an entity controlled by Priestner. The deal gives CanadaOne an enterprise value of $2.7 billion, first reported by Street Talk.
Politis has committed to buying $128 million worth of new shares under the offer and could buy another $10 million as a sub-underwriter of the transaction.
The new shares will be offered at $21, representing a 28.4 per cent discount to Tuesday’s closing price.
CanadaOne founder Priestner will hold about 7 per cent of Eagers Automotive shares once the transaction completes in the first quarter of next year. He said he believed the business could accelerate its growth through the deal.
CanadaOne has 42 dealerships across five Canadian provinces, underpinned by three top-selling car brands: Toyota, Ford, and General Motors.
For the past financial year, the Canadian business sold 48,000 new vehicles and 41,000 used vehicles with revenue of about $5.5 billion and pre-tax profit of $221 million.
Thornton said CanadaOne had a strong track record of growth, the right industry talent, and high-quality brand partnerships.
“Our objective has been to pursue international growth in the best market with the best partner,” he said.
Wilson Asset Management senior investment analyst Sam Koch said the choice of Canada for expansion made strategic sense.
“Canada’s market is 50 per cent larger than Australia’s, structurally more profitable, and remains highly fragmented,” Koch said. “It is also encouraging to see long-term alignment, with Nick Politis and CanadaOne founder Pat Priestner investing alongside shareholders.”
Eagers has about 14 per cent of Australia’s dealership market and sells brands including Toyota, Ford, Subaru, Hyundai, BMW and Volkwagen. It also sells the BYD in about 50 of its dealerships. Shares in Eagers have soared 144 per cent since January on the back of record revenue and profit growth.
Its performance has benefited from it being the main seller of the fast-growing Chinese brand BYD, accounting for sales of about 80 per cent of all new BYD vehicles in Australia. In August, Eagers reported half-year revenue of $6.5 billion and a record operating profit of $197.7 million, well ahead of forecasts.
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