Canadian Purchase Lifts Eagers Into Global Top 5

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This story features EAGERS AUTOMOTIVE LIMITED, and other companies.
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The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Investors welcome Eager Automotive’s first offshore acquisition in Canada and strategic partnership with Mitsubishi Corp. Now comes the execution.

-Eagers Automotive expands through stake in Canadian dealership
-Partnership with Mitsubishi Corp points to further collaboration
-Analysts highlight structural industry advantages in Canada
-Aligned vendor interest to mitigate execution risks, says Morgan Stanley

By Mark Woodruff

While offshore expansion has often proven challenging for Australian companies, investors have responded positively to Eagers Automotive’s ((APE)) first international acquisition.

Analysts expect effective integration of dealership group CanadaOne Auto Group and long-term value creation, supported by the disciplined operational approach shared by both businesses.

Eagers has a proven record of expanding its dealership network through disciplined domestic acquisitions and has strategically positioned itself as a market leader in electric vehicle retailing.

Management sought “the best market with the best partner” for offshore expansion and identified CanadaOne Auto Group’s (CanadaOne) profitable growth and 42-dealership platform as a strong foundation.

Eagers will invest just over -$1.0bn to acquire a 65% stake in CanadaOne, one of Canada’s top five dealership groups, which holds more than $700m in freehold property.

The deal, expected to close in the first quarter of 2026, will be partly funded by a $452m entitlement offer comprising a 1 for 12 partially underwritten accelerated non-renounceable pro rata entitlement offer of $21.00 per new share.

At the same time, Eagers has entered a strategic partnership with Japan’s Mitsubishi Corporation, which is investing -$70m for a 20% stake in Eagers’ used-car business, easyauto123. Proceeds from this investment, along with a $50m placement to Mitsubishi (representing about 1.1% of shares on issue) will help fund the CanadaOne acquisition.

Macquarie expects Mitsubishi and Eagers to continue leveraging their respective strengths to unlock further growth opportunities. Over time, Eagers may also use CanadaOne’s established infrastructure to introduce the easyauto123 platform into North America.

The Mitsubishi alliance signals to Canaccord Genuity a strong commitment by both parties to develop and expand their prospective mobility joint venture.

The analysts suggest Mitsubishi Corp’s recent increase in its FleetPartners Group ((FPR)) stake to 19% may serve as a useful indicator of potential future collaboration or strategic activity with Eagers.

Mitsubishi’s stake in the easyauto123 business opens the door to collaboration in areas like independent used-car operations, mobility services, and potentially joint ventures in EV or fleet management.

Morgans highlights Mitsubishi has interests across multiple geographies and auto-related businesses including fleet, finance, and distribution.

This broker believes the Eagers business now has multiple levers for a material earnings step-up over time, driven by significant growth potential in Canadian auto retail, global opportunities in independent used vehicles, and ancillary revenue streams supported by its growing scale.

Expansion in domestic franchise auto through higher market share and margins is also anticipated.

In terms of an offshore expansion strategy, UBS highlights the above transactions tick multiple boxes, highlighting well-structured terms, a strong alignment and incentivisation framework, attractive growth potential, and effective risk management features.

Advantages of alliance with CanadaOne

Ord Minnett highlights clear evidence of operational excellence at CanadaOne, with sales per location around 90% above the industry average.

Strong profit margins are also noted with a FY25 return on sales (ROS) of 4%, roughly double the Australian industry average, supported by parts and service revenue covering 109% of fixed costs.

The Canadian franchised automotive market is well positioned for continued consolidation, and CanadaOne has a strong history of growth through acquisition, explains Macquarie. It’s felt this momentum will persist under Eagers’ ownership, supported by both management teams’ proven M&A track records.

Compared to Australia, Morgan Stanley notes a similar industry structure and more favourable competitive intensity in Canada, where CanadaOne currently holds around 2.5% of the new vehicle sales market.

This broker observes Canada’s dealership landscape, with 3,700 dealerships and the top five groups holding less than 10% market share, resembles Australia before Eagers’ 2019 acquisition of Automotive Holdings Group.

Around 58% of Canadian dealers operate a single site, half run one site with one brand, and nearly 50% expect to sell their business by 2035, highlight the analysts.

Analysts at Moelis attribute the outperformance in Canada relative to Australia to stronger back-end revenue contributions supported by seasonal conditions, steady new vehicle demand, and a more consolidated OEM landscape.

Eagers prior to the acquisition

Centred on owning and operating motor vehicle dealerships, Eagers Automotive’s core business provides a full range of services, including new and used vehicle sales, servicing, parts, and consumer finance.

The company has an around 14% share of the new vehicle market in Australia, selling brands including Toyota, Ford, Hyundai, BMW and China’s BYD.

The company has also built a leading position in electric and hybrid vehicles, holding a 34% share of new energy vehicle sales in its regions. Eagers’ dealerships are responsible for circa 80% of all BYD (EV) sales in Australia.

A series of acquisitions in Victoria, Queensland, and the Northern Territory through 2023-24 strengthened the company’s dominance in the Australian market, providing scale efficiencies and new revenue streams.

Management has also diversified the business model by taking a majority stake in Carlins automotive auctions and has grown easyauto123 into a national used-car network, both of which complement Eagers’ core new-car franchise operations and provide exposure to the high-margin used vehicle market.

The company’s easyauto123 used-car supermarkets delivered a record first-half profit (December year-end) amid strong sourcing advantages and high used-car demand.

Details of the CanadaOne deal and potential upside

Macquarie believes management at Eagers has taken a patient and highly disciplined approach to its offshore expansion. Not only is the deal on strategy, but the broker believes it will likely be earnings accretive in a highly attractive market.

Following the acquisition, Eagers will rank among the world’s top five automotive retailers, strengthening its global OEM relationships and creating potential long-term synergy opportunities, highlights Morgan Stanley.

Alternative acquisitions may have delivered stronger near-term EPS accretion, suggests Canaccord, but management remains focused on long-term strategic objectives rather than short-term gains, consistent with its proven track record.

The -$1,043m acquisition comprises -$386m scrip and -$658m cash. Post completion (expected end of February 2026), Eagers will have a respective 55% and 65% interest in operating companies and property.

Pat Priestner, owner and founder of CanadaOne, will retain a stake in operating companies and property to the tune of 30% and 35%, respectively.

The remaining 15% stake in operating companies will be held by existing equity dealer principals.

Model

CanadaOne attributes part of its success to its Dealer Partner model, which provides ownership opportunities.

Eagers and Priestner will hold reciprocal put and call options over the latter’s remaining stake in CanadaOne, exercisable progressively after five years from completion. In addition, Priestner retains an option to acquire up to a 5% interest in easyauto123.

On a 2026 basis, Macquarie forecasts EPS accretion of 7%, assuming the acquisition settles at the end of February 2026, while Bell Potter sees no cost synergies in 2026, and only modest synergies in 2027 and beyond.

Organic revenue growth in the mid to high single digits over the medium term is assumed by Bell Potter, which is below the organic compound annual growth rate (CAGR) of around 15% over the past two and a half years, highlights the broker.

The acquisition provides a platform for growth through shared processes, data integration, and enhanced operational efficiency, explains Canaccord, while also establishing a strong foothold for a long pipeline of bolt-on acquisitions across Canada.

For 2026 and 2027, this broker increases its EPS forecasts by 12.9% and 16.4%, respectively, reflecting the closing of the acquisition in FY26 and a full year of ownership in FY27.

Outlook

The next key scheduled event is an analyst and investor day on 27 October, where Bell Potter anticipates an update on progress with the Next100 strategy and also potential further details on CanadaOne and its outlook.

Morgan Stanley believes Eagers Automotive’s strong track record and aligned vendor interests help mitigate execution risks, while Canaccord also takes confidence from management’s long-term planning and careful consideration of the transaction.

Canaccord believes the first Canadian meetings took place in October 2023, and the first CanadaOne Auto meetings occurred in early 2025.

Ord Minnett raises its 12-month target price to $31.00 from $23.50 following the acquisition and upgrades to Accumulate from Hold on valuation grounds.

The average target in the FNArena database of six daily covered brokers has risen to $29.38 from $24.40 prior to the CanadaOne announcement. This average implies around -15% downside to yesterday’s $34.65 closing share price.

There are two Buy ratings, one Hold, and two midway between Buy and Hold at Accumulate, while UBS keeps its Sell rating. This broker’s target rises to $18.70 from $17.00 but is easily the lowest in the database.

Excluding UBS would lift the consensus target to $31.51 on a range of $29.98-$33.35.

Outside of daily coverage, Canaccord Genuity (Buy) has raised its target to $30.60 from $28.00, while Hold-rated Moelis increased its target to $35.90 from $28.62.

Jarden (Neutral) is yet to refresh its research following the acquisition news.

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