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ACQUISITIONS AND DIVESTITURES
 12 Months Ended
Dec. 31, 2021
Business Combinations [Abstract]  
ACQUISITIONS AND DIVESTITURES ACQUISITIONS AND DIVESTITURESResults of acquired businesses, which are primarily dealerships, are included in our accompanying Consolidated Statements of Income commencing on the date of acquisition. Our acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Upon the completion of purchase accounting, the fair value of our manufacturer franchise rights are determined as of the acquisition date, by discounting the projected cash flows specific to each franchise. Included in this analysis are market participant assumptions related to the cash flows directly attributable to the franchise rights, including
year-over-year and terminal growth rates, working capital requirements, weighted average cost of capital, future gross margins, and future selling, general, and administrative expenses.
LHM Acquisition
On December 17, 2021, we completed the acquisition of the equity interests of, and the real property related to the businesses of the Larry H. Miller Dealerships and the Total Care Auto, Powered by Landcar business. The acquisition diversifies Asbury's geographic mix, with entry into six Western states; Arizona, Utah, New Mexico, Idaho, California and Washington, and adds to the Company’s growing Colorado presence.

As a result of the LHM Acquisition, we acquired 54 new vehicle dealerships, seven used car stores, 11 collision centers, a used vehicle wholesale business, the real property related thereto, and the entities comprising the TCA Business for a total purchase price of approximately $3.48 billion. The real property was acquired in escrow, to be released, together with the related portion of the preliminary purchase consideration, subject to the satisfaction of certain title related conditions. The preliminary purchase price was paid in cash.
The sources of the preliminary purchase consideration are as follows:
(In millions)
Cash, net of cash acquired$195.0 
Common stock offering 666.9 
Senior notes1,578.5 
Real estate facility513.0 
New vehicle floor plan facility183.5 
Used vehicle floor plan facility51.0 
Payable to sellers6.0 
Preliminary purchase price, net of cash acquired$3,193.9 
Under the acquisition method of accounting, the tangible and intangible assets acquired and liabilities assumed are recorded at their estimated fair value based on information currently available. The following table summarizes the amounts recorded based on preliminary estimates of fair value:
(In millions)
Summary of Assets Acquired and Liabilities Assumed
Cash and cash equivalents$287.4 
Investments133.5 
Contracts-in-transit, net99.5 
Accounts receivable, net110.0 
Inventories, net285.0 
Other current assets25.4 
Total current assets940.8 
Property and equipment, net792.6 
Goodwill1,639.3
Intangible franchise rights870.0 
Operating lease right-of-use assets34.1 
Deferred income taxes136.5 
Other long-term assets5.6 
Total assets acquired4,418.9 
Accounts payable and accrued liabilities234.0 
Operating lease liabilities34.1 
Deferred revenue644.3 
Other long-term liabilities25.2 
Total liabilities assumed937.6 
Net assets acquired$3,481.3 
The preliminary acquisition accounting is based upon the Company’s estimates of fair value. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management, including the books and records of Larry H. Miller. Our estimates and assumptions are subject to change during the measurement period, not to exceed one year from the acquisition date. The areas of acquisition accounting that are not yet finalized primarily relate to the following significant items: (i) finalizing the review and valuation of land, land improvements, buildings and non-real property and equipment (including the models, key assumptions, estimates and inputs used) and assignment of remaining useful lives associated with the depreciable assets, (ii) finalizing the review and valuation of manufacturer franchise rights (including key assumptions, inputs and estimates), (iii) finalizing the review of the actuarial inputs to the value of business added intangible asset for TCA, (iv) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization period, (v) finalizing our review of certain assets acquired and liabilities assumed, (vi) finalizing the evaluation and valuation of certain legal matters and/or other loss contingencies, including those that we may not yet be aware of but meet the requirement to qualify as a pre-acquisition contingency, and (vii) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the initial acquisition accounting is based on our preliminary assessments, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. Additionally, the total consideration transferred is subject to certain post-close adjustments. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period.
The Company recorded $4.9 million of acquisition related costs during the year ended December 31, 2021. These costs are included in Selling, general, and administrative in the Consolidated Statements of Income.
The Company's Consolidated Statements of Income included revenue and net income attributable to LHM from December 17, 2021 through December 31, 2021 of $256.4 million and $15.7 million, respectively.
The following represents the unaudited pro forma information as if LHM had been included in the consolidated results of the Company since January 1, 2020:
For the Year Ended December 31,
20212020
(In millions)
(Unaudited)
Pro forma revenue$15,431.5 $12,927.3 
Pro forma net income$777.3 $359.9 
This pro forma information incorporates the Company's accounting policies and adjusts the results of the LHM Acquisition for depreciation, rent expense, and interest expense assuming that the fair value adjustments and indebtedness incurred in connection with the LHM Acquisition had occurred on January 1, 2020. They have also been adjusted to reflect the $4.9 million of acquisition related costs incurred during 2021 as having occurred on January 1, 2020.
Park Place Acquisition
On December 11, 2019, we announced the proposed acquisition of substantially all of the assets of the businesses of the Park Place Dealership family of entities (collectively, "Park Place") pursuant to that certain Asset Purchase Agreement, dated as of December 11, 2019, among the Company, Park Place and the other parties thereto (the "2019 Asset Purchase Agreement"), and related agreements and transactions (collectively, the "2019 Acquisition"). On March 24, 2020, as a result of the uncertainties related to the COVID-19 pandemic we delivered notice to the sellers terminating the 2019 Acquisition pursuant to the terms of the related agreements and transactions in exchange for the payment of $10.0 million of liquidated damages which is reflected in our accompanying Consolidated Statements of Income as Other operating (income) expense, net. See Note 14 "Debt" for details related to the impact on certain financing arrangements as a result of terminating the 2019 Acquisition.
On July 6, 2020, the Company, through two of its subsidiaries, entered into an Asset Purchase Agreement with certain members of the Park Place Dealership group, to acquire substantially all of the assets of, and lease the real property related to, 12 new vehicle dealership franchises (8 dealership locations), two collision centers and an auto auction (collectively, the "Park Place Acquisition"). The Park Place acquisition was completed on August 24, 2020 and financed through a combination of cash, floor plan facilities and seller financing. The seller financing comprised $150.0 million in aggregate principal amount of a 4.00% promissory note due August 2021 and $50.0 million in aggregate principal amount of a 4.00% promissory note due February 2022 (collectively, the "Seller Notes"). In September 2020, the Company redeemed the Seller Notes with proceeds from the offering of 4.50% Notes due 2028 and 4.75% Notes due 2030. See Note 14 "Debt" for further details.
The sources of the purchase consideration are as follows:
(In millions)
Cash$527.4 
Seller notes200.0 
New vehicle floor plan facility127.5 
Used vehicle floor plan facility35.0 
Purchase price$889.9 
Under the acquisition method of accounting, the purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on information currently available. For the year ended December 31, 2021, we recorded a $1.5 million measurement period adjustment to Property and equipment and Goodwill, respectively. The following table summarizes the allocation of the purchase price:
(In millions)
Summary of Assets Acquired and Liabilities Assumed
Inventories$120.8 
Loaner vehicles57.0 
Property and equipment36.5 
Goodwill360.4 
Manufacturer franchise rights324.0 
Operating lease right-of-use assets202.7 
Total assets acquired1,101.4 
Operating lease liabilities(202.2)
Other liabilities(9.3)
Total liabilities assumed(211.5)
Net assets acquired$889.9 
On May 20, 2021, we exercised the purchase option for certain Park Place real estate leases whose original operating lease right-of-use assets and liabilities totaled $99.5 million. We acquired these properties for $217.1 million which was partly financed through the 2021 BofA Real Estate Facility.
The Company's Consolidated Statements of Income included revenue attributable to Park Place for the year ended December 31, 2021 of $1.79 billion.
The Company recorded $1.3 million of acquisition related costs during the year ended December 31, 2020. These costs are included in Selling, general, and administrative in the Consolidated Statements of Income.
The Company's Consolidated Statements of Income included revenue and net income attributable to Park Place from August 24, 2020 through December 31, 2020 of $589.6 million and $27.6 million, respectively.
The following represents the unaudited pro forma information as if Park Place had been included in the consolidated results of the Company since January 1, 2019:
For the Year Ended December 31,
20202019
(In millions)
(Unaudited)
Pro forma revenue$7,989.6 $8,828.1 
Pro forma net income$276.2 $234.0 
This pro forma information incorporates the Company's accounting policies and adjusts the results of Park Place for depreciation, rent expense, and interest expense assuming that the fair value adjustments and indebtedness incurred in connection with the Park Place Acquisition had occurred on January 1, 2019. They have also been adjusted to reflect the $1.3 million of acquisition related costs incurred during 2020 as having occurred on January 1, 2019. The pro forma information also assumes that the September 2020 divestiture of the Lexus Greenville dealership, which was related to the Park Place Acquisition, occurred on January 1, 2019.
Other Acquisitions and Divestitures
In addition to the LHM Acquisition during the year ended December 31, 2021, we acquired the assets of 11 franchises (10 dealership locations) in in the Denver, Colorado market and three franchises (one dealership location) in the Indianapolis, Indiana market for a combined purchase price of $485.7 million. We funded these acquisitions with an aggregate of $455.1 million of cash and $9.6 million of floor plan borrowings for the purchase of the related new vehicle inventory. In the aggregate, these acquisitions included purchase price holdbacks of $21.0 million for potential indemnity claims made by us with respect to the acquired franchises. In addition to the acquisition amounts above, we released $1.0 million of purchase price holdbacks related to current and prior year acquisitions during the year ended December 31, 2021.
In addition to the Park Place Acquisition during the year ended December 31, 2020, we acquired the assets of three franchises (one dealership location) in the Denver, Colorado market for a combined purchase price of $63.6 million. We funded
this acquisition with an aggregate of $34.5 million of cash and $27.1 million of floor plan borrowings for the purchase of the related new vehicle inventory. In the aggregate, this acquisition included purchase price holdbacks of $2.0 million for potential indemnity claims made by us with respect to the acquired franchises. In addition to the acquisition amounts above, we released $2.5 million of purchase price holdbacks related to current and prior year acquisitions during the year ended December 31, 2020.
During the year ended December 31, 2019, we acquired the assets of nine franchises (five dealership locations) and one collision center in the Indianapolis, Indiana market and one franchise (one dealership location) in the Denver, Colorado market for a combined purchase price of $210.4 million. We funded these acquisitions with an aggregate of $153.9 million of cash and $55.3 million of floor plan borrowings for the purchase of the related new vehicle inventory. In the aggregate, these acquisitions included purchase price holdbacks of $1.2 million for potential indemnity claims made by us with respect to the acquired franchises. In addition to the acquisition amounts above, we released $ 0.8 million of purchase price holdbacks related to a prior year acquisition.
Goodwill and manufacturer franchise rights associated with our Dealership segment acquisitions will be deductible for federal and state income tax purposes ratably over a 15-year period.
Below is the allocation of the purchase price for the acquisitions (other than the LHM Acquisition and the Park Place Acquisition) for the years ended December 31, 2021 and 2020. For the 11 franchises (10 dealership locations) in the Denver, Colorado market and three franchises (one dealership location) in the Indianapolis, Indiana market acquired in 2021, the preliminary acquisition accounting is based upon the Company’s estimates of fair value. The estimated fair values of the assets acquired and liabilities assumed and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as other information compiled by management. As the initial acquisition accounting is based on our preliminary assessments, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. Additionally, the total consideration transferred is subject to certain post-close adjustments. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. We will continue to evaluate these items until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period.
For the Year Ended December 31,
20212020
(In millions)
Inventory$38.3 $29.8 
Real estate99.9 14.5 
Property and equipment4.4 0.4 
Goodwill 187.2 5.4 
Manufacturer franchise rights150.5 13.8 
Loaner vehicles8.9 — 
Other(3.5)(0.3)
Total purchase price$485.7 $63.6 
During the year ended December 31, 2021, we sold one franchise (one dealership location) in the Charlottesville, Virginia market. The Company recorded a pre-tax gain totaling $8.0 million, which is presented in our accompanying Consolidated Statements of Income as Gain on dealership divestitures, net.
During the year ended December 31, 2020, we sold two franchises (two dealership locations) in the Atlanta, Georgia market, we sold six franchises (five dealership locations) and one collision center in the Jackson, Mississippi market, and we sold one franchise (one dealership location) in the Greenville, South Carolina market. The Company recorded a pre-tax gain totaling $62.3 million, which is presented in our accompanying Consolidated Statements of Income as Gain on dealership divestitures, net.
During the year ended December 31, 2019, we sold one franchise (one dealership location) and one collision center in the Houston, Texas market. The Company divested $30.1 million of assets, which primarily consisted of inventory and property and equipment, resulting in a pre-tax gain of $11.7 million, which is presented in our accompanying Consolidated Statements of Income as Gain on divestitures.
The divested businesses would not be considered a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X.