PAG acquires 9% of Penske Truck Leasing for $219 million

Penske Truck Leasing Co.'s product lines include full-service truck leasing, contract maintenance, commercial and consumer truck rentals, transportation and warehousing management and supply chain management solutions.

The Trucker News Services

7/2/2008

BLOOMFIELD HILLS, Mich. — Penske Automotive Group, Inc., an international automotive retailer, said Tuesday that it has acquired a 9 percent limited partnership interest in Penske Truck Leasing Co. L.P. from GE Capital for $219 million.

The all-cash transaction was financed with borrowings under the company’s U.S. credit agreement. PTL, a joint venture between Penske Corporation and GE Capital, operates more than 200,000 vehicles and serves customers from more than 1,000 locations in North America, South America, Europe, and Asia.

“We view the opportunity to invest in PTL as an outstanding use of capital,” Penske Automotive Group Chairman Roger Penske said. “In addition to expected earnings accretion, we anticipate significant cash flow from partnership operating distributions and U.S. tax savings over the next three to five years to recoup a substantial portion of our investment.”

PTL is currently a key partner in the company’s smart USA distribution business, managing the 24-hour roadside assistance program, the company said. PTL’s success with the smart USA roadside assistance program allows PAG to evaluate the development of a similar proprietary product for the company’s new and pre-owned vehicle customers.

“This investment strengthens our relationship with PTL, and allows us to foster further cooperation between our two companies,” Penske Automotive Group President Rob Kurnick said. “We intend to utilize the 700-person PTL corporate sales force to develop vehicle purchase programs with PTL’s lease and rental customers and other target markets. Further, we intend to implement potential operational synergies such as purchasing and utilizing PTL’s India-based infrastructure for a wide range of customer support and administrative functions.”

In connection with the transaction, Penske Automotive’s U.S. credit agreement was expanded to include an additional $219 million of non-amortizing term loans, which were used to fund the acquisition of the PTL limited partnership interests. Including the term loans, the total commitment under the U.S. credit agreement was increased to $479 million, allowing available credit for continued investment in the company’s core retail automotive strategies.

PAG projects an increase to 2008 earnings relating to the PTL transaction in the range of $0.02 to $0.04 per share and expects to update third quarter and full year 2008 guidance on its second quarter earnings conference call scheduled for July 30.

Penske Automotive Group Inc., headquartered in Bloomfield Hills, Mich., operates 308 retail automotive franchises, representing more than 40 different brands, and 27 collision repair centers. Penske Automotive has 161 franchises in 19 states and Puerto Rico and 147 franchises located outside the United States, primarily in the United Kingdom.

Penske Truck Leasing Co. L.P. is headquartered in Reading, Pa. Product lines include full-service truck leasing, contract maintenance, commercial and consumer truck rentals, transportation and warehousing management and supply chain management solutions.