9:43 am, August 16, 2023
Swansway boss Peter Smyth says Global Auto Holdings is taking on a ‘high-risk strategy’ with its purchase of Lookers.
Speaking on the latest episode of the Car Dealer Podcast, the UK motor trade legend questioned how the Canadian outfit will be able to keep Lookers profitable.
The firm, which has a similar turnover to Swansway Group, is said to be borrowing more than £500m to fund the deal to take over Lookers, and Smyth says the deal is likely to eat into the firm’s impressive profit margin.
Chatting about the deal with hosts James Baggott and Jon Reay, he said: ‘I am a little bit bemused by it because the company that are buying Lookers have a turnover of around $1bn and Swansway as a business has a turnover of £880m, or thereabouts, so in turnover terms and sheer number of site terms, they’re a similar size to us.
‘They are very much more profitable than us – or certainly they have been during the Covid period where we’ve all enjoyed exceptional profits – but to me it just seems a massive undertaking for a company of that size to take on something the size of Lookers.
‘They have obviously borrowed the £500m and all that they can do really is leverage that borrowing against the properties held in the balance sheet of Lookers.
‘Lookers probably have been sat on properties for years and years and years. Probably some of them will be written down. Property prices will have gone up, so I’d guess there will be a revaluation of the properties and that’s what they’ll be borrowing against.
‘I just think that for them it seems like a high-risk strategy, especially at the moment when if you want to borrow money on term debt you are paying approaching eight per cent and it will be probably no different in the States.
‘All that debt they’re going to put on to Lookers balance sheets, it will undoubtedly affect the profitability in the same way that when TDR bought Asda it’s now put Asda into a loss situation, and as an OEM I think they could be a little concerned about that.’
The Lookers deal was one of several topics up for debate on this week’s episode of the podcast with Reay, Baggott and Smyth discussing the biggest industry headlines.
It came after the deal edged closer earlier this month when Cinch agreed to accept Global Auto Holdings’ revised offer of 130p per share.
The trio also chatted about the issues facing the new wave of Chinese EV brands, a House of Lords inquiry into electric cars and record sales from Big Motoring World.
A full list of the stories discussed can be found here:
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House of Lords launches inquiry into electric cars and the barriers to achieving 2030 ban
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Used car supermarket Big Motoring World notches up record sales
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Franchised dealers back Chinese disruptors to make a big impact on the UK new car market
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Two in three new car buyers don’t recognise new EV brands – despite some being on sale in UK
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Amari bosses on selling supercars, his £1.2m watch and why they love the luxury used car game
You can listen to all episodes of the Car Dealer Podcast on Spotify, or wherever you get your podcasts.
Smyth also recently appeared on the first edition of our new Inspiring Leaders Podcast. Catch the full episode here.
