"Our job when deploying capital is to use it for what we believe is the highest return," he said.
Failure to consummate the planned $1 billion acquisition of most of the luxury Park Place Dealerships in Texas, however, came down to time constraints related to the deal's financing arrangements.
"The last thing I wanted to do was cancel that deal," Hult said April 17. "We would have prolonged the closing and finished the deal at some point. But it wasn't a traditional buy/sell situation."
The deal was slated to close at the end of March, a month before its largest slice of financing, a $525 million bond, was to expire. Asbury also aimed to facilitate the Park Place purchase by tapping into a mortgage loan facility and a senior credit line to floorplan the Park Place vehicle inventory. Those elements, too, would need to be extended to postpone the transaction.
But March did not go as planned. The Duluth, Ga., dealership group instead pivoted to crisis mode and terminated the sale March 24.
When the coronavirus outbreak drastically slowed auto sales and shuttered showrooms across the country in a matter of weeks, such an extension was off the table, Hult said.
"No one would have signed off on it," he said of the underwriters and lenders.
Asbury officials informed Park Place owner Ken Schnitzer that the deal was off. By that time, a number of states were under stay-at-home orders, and the automotive sales and service business had fallen drastically. Asbury paid Schnitzer $10 million in damages for terminating the deal.
"I believe all we have is our reputation. I didn't want to string him out," Hult said.
Asbury repaid the bond to investors, and the mortgage facility and credit line were dissolved. There are currently no plans to reopen the deal with Park Place, though Hult said he believes that Asbury has demonstrated its ability to handle an acquisition of that scale.
"Our sole focus was to successfully close with Park Place. We've shown we could get the bond. We had the roadmap in place," Hult said.
