A General Motors logo is seen at a dealership in Montreal, May 31, 2009.Christinne Muschi/Reuters
Dealership group AutoCanada Inc. has reached a deal with General Motors of Canada Co. that will allow the publicly traded company to own the auto maker's stores outright for the first time.
AutoCanada and Pat Priestner, the company's founder and former chairman will divide ownership of nine stores in which the Edmonton-based company held a majority stake with no voting rights. The three way deal was announced late Thursday.
GM Canada had prohibited outright ownership of its dealers by publicly traded companies, but permitted AutoCanada to hold equity stakes in the stores as long as Mr. Priestner retained voting control.
He departed from the company earlier this year.
AutoCanada will take control of five stores, one each in Saskatoon and Winnipeg and three in smaller centres, while Mr. Priestner will gain ownership of a store in Edmonton, two in Sherwood Park, Alta., in the Edmonton area and a Chevrolet dealership in Kelowna.
Under the terms of the deal between AutoCanada and GM, each general manager at the GM stores owned by the publicly traded dealership group will be required to own a minority equity position in the stores.
Mr. Priestner will pay $23-million to AutoCanada as part of the transaction.
The deal brings to a close the relationship between the company Mr. Priester founded as a real estate investment trust, which has grown mainly by acquisition to become one of the largest dealership groups in the country. That growth came even though several auto makers, including GM did not permit the company to own its dealerships.
That ban by several auto makers, a list that also includes Ford Motor Co. of Canada Ltd., Honda Canada Inc. and Toyota Canada Inc., led to the awkward situation where the dealership company was banned from owning outlets, but Mr. Priestner was allowed to own auto makers' dealerships privately while he was chief executive officer and later chairman of AutoCanada. He owns some Toyota and Ford stores privately.
In the case of Honda, AutoCanada loaned Mr. Priestner money to buy Honda and Acura outlets and received a share of the profits from the stores as a way of getting around the Honda Canada ban on publicly traded companies owning dealerships.
Auto makers that prohibit ownership by publicly traded companies in Canada permit the practice in the United States, where Penske Automotive Group Inc. for example owns Ford, Honda and Toyota dealerships, while publicly traded Lithia Motors Inc. owns Honda and Toyota outlets.