Penske Automotive Invests In Japanese Luxury Dealership Group

Automotive and commercial vehicle dealership operator Penske Automotive Group has announced its entry into the Japanese market with the acquisition of a 49 percent stake in the Nicole Group, a luxury dealership group that operates in Tokyo and Kanagawa.

The Nicole Group operates 4 BMW and 3 MINI dealerships, a Rolls-Royce and a Ferrari dealership, plus 2 stand-alone service centers and 2 pre-owned showrooms. It is one of the largest privately owned BMW/MINI dealers in Japan, and is also the exclusive importer and distributor of BMW Alpina vehicles for the country.

“We are thrilled with the opportunity to enter the Japanese market with a strong and established local partner,” said Penske Automotive Group Chairman, Roger S. Penske. “The Nicole Group represents world-class brands and has been named the best BMW dealership in Japan a record seven times. As imports continue to grow market share in Japan, combined with the group’s solid reputation in the marketplace, we expect to leverage the strength of the existing business while driving further expansion through organic growth and future acquisitions.”

Penske Automotive said that it will treat its ownership stake as an equity investment, with its pro rata share of income reported as equity in earnings of affiliates on its income statements. Due to the fact that it’s a joint venture, Penske will not realize any incremental value.

In a note issued to investors this week, Penske Automotive was downgraded by Zacks Investment Research from a “hold” rating to a “sell” rating, with Zacks stating that, “Penske Automotive’s third-quarter 2015 earnings improved year over year but missed the Zacks Consensus Estimate.” Although revenues also increased year over year and marginally surpassed the Zacks Consensus Estimate, concerns remain about its large merchandise inventory and the intensifying industry competition.

Over the past year, shares of Penske Automotive have lost more than 28 percent.