Chicago-based Standard Parking Corp. will nearly double its size and eliminate a leading competitor with its $138 million purchase of Central Parking Corp.
The sale, announced Wednesday, will combine two large operators of parking garages in downtown Chicago. It suggests the potential for rate increases hitting consumers still adjusting to the city’s hike in parking taxes that took effect Jan. 1.
Standard Parking said it has 225 locations in Chicago, including O’Hare Airport. Central Parking’s website lists more than 100 locations in Chicago.
The companies do not own the spaces. Rather, they manage garages for the owners and collect a share of the revenue.
For that reason, the sale should have “zero effect” on rates, said Michael Wolf, executive vice president at Standard Parking. “The owners of the garages are really the ones who set the rates, and owners have different objectives for their property.”
Wolf said owners in mostly retail or residential complexes often hold rates low, while others concentrate on maximizing income.
Both companies have a national operating base. Together, they will control about 2.2 million parking spaces in office buildings, airports, stadiums, hospitals and other locations.
Standard Parking, which is publicly traded, said it will issue 6.16 million new shares to Central Parking owners, giving them a 28 percent stake in the combined company. Central Parking owners also will get up to $27 million in cash over the next three years.
John Hammerschlag, president of the parking consulting firm Hammerschlag & Co. Inc., said the sale unites “two Goliaths in the industry, but might create opportunity for Davids to prevail.” He said Standard Parking will have to remain focused on serving property owners as it consolidates operations.
As for rates, demand is the biggest factor in whether they rise, Hammerschlag said. “Business is getting better” and more cars will come downtown once the city finishes the Wacker Drive reconstruction, he said.
The sale is expected to close in the third quarter, but requires an antitrust review plus approval from Standard Parking shareholders. The company’s stock rose 51 cents Wednesday to $18.05 a share.
Executives said the deal allows for about $20 million in overhead expenses to be eliminated. Layoffs should be relatively small, about 500 jobs of the combined headcount of 26,000, they said.
After the sale, Standard Parking will continue to be based in Chicago. The company said it will have a “major support office” in Nashville, Tenn., the home of Central Parking.
Press materials on the deal contained no speculation on future rate increases in Chicago or other cities where they are dominant. The executives’ commentary focused instead on cost cuts, savings from greater purchasing power and an ability to cross-sell new services.
James Wilhelm, president and chief executive officer of Standard Parking, will continue in that role. Central Parking’s chief executive, James Marcum, will be chief operating officer of the new company.
Central Parking is a private company owned by Kohlberg & Co. LLC, Lubert-Adler Partners LP and Versa Capital Management LLC.
As part of the sale, Standard Parking will assume $210 million of debt, which it will refinance under a $450 million credit line.
Including the debt, Standard Parking is paying $350 per parking space. In a high-cost market such as Chicago, the price looks cheap.
Monthly parking rates in the Loop start at about $290 and go higher than $400.
Mayor Rahm Emanuel and the City Council raised the weekday parking taxes on downtown locations $2 per day, to $5, as of Jan. 1 for locations that charge the highest rates.
In a statement about Standard Parking’s deal, Emanuel pronounced himself “pleased that the company will grow in its size and depth, while keeping its headquarters in Chicago and working with us to move the city forward.”