9:46 am, June 20, 2023
Alpha Auto Group (AAG) is set to become a new major force in the UK motor trade, despite having no previous presence here.
The company, which is headquartered in Toronto, Canada, swooped on UK listed dealer group Lookers on June 20, 2023, with an offer worth more than £465.4m via a bidding vehicle, called Global Auto Holdings Limited.
It offered 120p per share and is set to take control of one of the largest and most well-known car dealer groups in the UK.
But who is AAG and why has it purchased Lookers? Here we take a closer look at the company and explain more behind the deal.
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Who is Alpha Auto Group?
It’s a reasonable question – and one even the team at Car Dealer was trying to answer. Experts we spoke to who specialise in mergers and acquisitions in the UK market knew very little about AAG. As such, the deal has come out of the blue from a little known bidder.
Despite being unknown on these shores, AAG is a rapidly growing player across the pond.
It was founded in 2014 by Kuldeep Billan, who is currently executive chairman.
According to AAG’s website, Billan created the company ‘with the bedrock principles of C.E.M – Customer centricity, Engaged employees and strong partnerships with Manufacturers’. He has worked in various roles across the business including ‘at the dealership level’.
AAG quickly became a major motor retailer in its home market of Canada, snapping up 10 dealerships in Ottawa and Eastern Ontario in May 2018.
But in June 2018, it expanded and moved into the US after purchasing Oregon-based Wilsonville Group and its two Toyota and Subaru dealerships – combined these two sites shifted 8,000 cars and generated $346m (CAD) in revenue in 2017.
It has since become one of the largest and most profitable dealer groups in Canada, and has 15 showrooms across Canada and the United States.
Why did they want to buy Lookers?
The official reason is because AAG wants to become a global player, and its sees the UK market as the perfect place to expand its booming operations.
In the recommended cash offer announcement, posted on the London Stock Exchange on June 20, 2023, AAG via its ‘Global Auto Holdings Limited’ bidding vehicle, said it sees Lookers ‘as a crucial pillar in its vision of becoming a leading global auto retail group, which will enhance geographic diversification and stability for both businesses given leading positions in both the UK and North America’.
It added: ‘A key driver in the acquisition of Lookers is that it combines two strong and deeply experienced management teams which will allow the Wider Group to effectively manage changes in the global operating environment, drive best practices across the businesses and position the wider business for future growth both organic and inorganic.
‘In summary, the offer has the potential to significantly enhance the performance of Lookers to the benefit of its customers, OEM partners and employees, each benefiting from the combined efforts of expert management teams with a track record of successfully acquiring and operating auto retailers in multiple jurisdictions.’
AAG went on to say that its private ownership status will ‘create a more sustainable, responsive and agile platform for all stakeholders, including its OEM partners, capable of navigating rapidly changing market and structural conditions’.
Lookers said the deal will give it a ‘stronger platform’ to grow in the UK, with the ‘potential to expand internationally’.
The buy-out will add further weight to industry speculation that UK PLCs are materially undervalued.
As David Kendrick, CEO of dealer making accountancy firm UHY Hacker Young, told Car Dealer: ‘It was only a matter of when, not if!’
Which manufacturers do they currently represent?
AAG has 15 dealerships in Canada and the US, but the Lookers deal will add over 150 UK-based showrooms to its books.
It currently has franchises across the pond with Toyota, Subaru, Ford, Honda, Acura, Hyundai, Dodge, Chrysler, Jeep, Ram, BMW, Mini, Audi and Mercedes-Benz.
The Lookers deal will see some OEM overlaps, but they will be ‘complimentary’.
What do we know about their financial performance?
Unlike UK PLCs, there is not a huge amount known about AAG, especially its long-term financial results.
Last year Lookers recorded revenue of £4.3bn and a pre-tax profit of £84.4m, but similar accounts are hard to find for AAG.
Car Dealer put the question to AAG and was told: ‘AAG turned over $1bn in 2022 and generated EBITDA profits of circa $100m.
‘While the number of sites AAG runs may be small, they are of a vast size and highly profitable.’
