Public groups plan U.S. acquisition blitz
All 6 say they're on the hunt for stores in 2013
 | Scott Smith: Talking with potential sellers, but no deals imminent |
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Despite forays into overseas markets by Group 1 Automotive Inc. and Penske Automotive Group, public retailers intend to roll full speed ahead on U.S. acquisitions this year.
All six publicly traded new-vehicle dealership groups have said in recent quarterly earnings calls that they are on the hunt for U.S. dealerships in 2013. That includes the four groups that reported fourth-quarter results last week.
One of them, Sonic Automotive Inc., is reviving acquisition activity after several years on the sidelines.
Sonic President Scott Smith expects to acquire stores adding $500 million in annualized revenue in 2013. Conversations are in the works with several potential sellers, though no deals are expected during the first quarter.
"If we can grow at that pace, we can do it out of cash that we generate rather than raising debt or issuing equity and still maintain all the other initiatives we have," Smith told Automotive News last week after Sonic's earnings announcement.
Sonic aims to replace revenues lost by recent store divestitures. After selling five Oklahoma stores late last year, Sonic has 103 stores.
While Sonic won't rule out new locations, it is primarily looking in the Sun Belt markets that make up the bulk of its footprint. But deals are less likely in California, where the company already has a strong presence and where real estate is expensive, Smith said.
"We've got roughly a third of the company's revenues based out of California," he said. "We'd be looking to diversify that a little bit."
Lithia
Lithia Motors Inc. executives expect to increase annual revenue by 10 to 15 percent in coming years through acquisitions.
Lithia has some deals in the works, CEO Bryan DeBoer said during an earnings conference call.
"We need to grow a little bit bigger than we have the last couple of years," DeBoer said. "Our return-on-equity thresholds are extremely steep, and we're not modifying those. So we have to find a bigger pond."
Lithia, which is based in Medford, Ore., has about $250 million to snap up stores if it finds the right deals this year, said CFO Chris Holzshu.
DeBoer expects Lithia to buy a store east of the Mississippi in the next six months and one in the Western United States sooner.
"We're also looking a little bit international, even though we believe that's more of a three- to five-year plan," DeBoer told Automotive News this year.
Western Europe and Canada also interest Lithia, DeBoer said.
Group 1
Group 1 will spend several months digesting the acquisition of 18 dealerships in Brazil, a deal expected to close March 1. But that won't keep CEO Earl Hesterberg on the sidelines.
"The Brazilian operation does not put a load on our U.S. or U.K. operating teams, which have more capacity," Hesterberg said on Group 1's earnings conference call last week. "To the degree we can find expansion opportunities that we can afford that are a good return on investment for our shareholders in the U.S. and the U.K., we will continue to expand there."
Group 1 isn't targeting a particular amount of spending or the acquisition of a specified amount of annual revenue.
Asbury
Asbury Automotive Group is involved in a number of acquisition conversations, CEO Craig Monaghan said last week after Asbury reported fourth-quarter results. They primarily involve mid-line import brands and some luxury brands.
Volkswagen and Bentley stores acquired in December are performing above expectations. "We are optimistic we will be able to get others done as well," Monaghan said.
Asbury is targeting acquisition of stores adding $400 million to $600 million in annual revenues during the next three years. It primarily is looking within its existing footprint, which stretches from New Jersey to Florida to Texas.
Said Monaghan: "We've got a lot of ground where we can go hunting."
Jamie LaReau contributed to this report
| Dealership groups' 2012 scorecard | ||||||
| New retail units | Change | Revenue | Change | Net Income | Change | |
| Asbury | 77,712 | 17% | $4.64 billion | 12% | $82.2 million | 21% |
| Group 1 | 128,550 | 26% | $7.48 billion | 23% | $100.2 million | 22% |
| Lithia | 55,666 | 32% | $3.32 billion | 26% | $80.4 million | 37% |
| Sonic | 128,636 | 18% | $8.37 billion | 11% | $89.1 million | 17% |
You can reach Amy Wilson at awilson@crain.com.
