Group 1 Automotive Inc., a Houston-based chain of 30 new-car dealerships and five collision service centers in Texas and Oklahoma, has filed to go public in a $55 million initial public offering.
Group 1 will seek a listing on the New York Stock Exchange under the symbol GPI, according to the preliminary prospectus filed Tuesday, June 24, with the Securities and Exchange Commission.
The transaction is unique in the auto business because it represents a model consolidation patterned after other industries, according to Sheldon Sandler, managing director of corporate finance for investment banking firm Ladenburg Thalmann & Co. in New York.
The initial public offering creates a new company set up to consolidate dealerships. The other auto dealership initial public offerings started with one multifranchise dealer who wanted to use the transaction to finance the acquisition of other dealerships, said Sandler.
DEALER GROUPS COMBINE
Group 1 will buy four dealer groups for stock just before the initial public offering, according to the prospectus. The company's chairman will be B.B. Hollingsworth Jr., who was president of Service Corp. International in Houston during its early growth period. The company is the leading consolidator of the funeral industry.
The founding four dealer groups have combined annual revenues of more than $825 million. Group 1 dealers retailed 21,378 new vehicles and 17,220 used vehicles in 1996.
They sell 21 vehicle lines: Acura, Chevrolet, Chrysler, Dodge, Eagle, GMC, Honda, Isuzu, Jeep, Kia, Lexus, Lincoln, Mazda, Mercury, Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac, Suzuki and Toyota.
The prospectus for the company omitted numbers on shares offered to the public and price per share - possibly because of uncertainty about automotive retail stocks. Just two weeks ago Cross-Continent Auto Retailers Inc. of Amarillo, Texas, announced its second quarter results would fall below expectations.
GROUP 1 PLAYERS
Group 1 'will probably want to delay as long as they can until they know what the multiples are going to be,' said Sandler, an investment banker specializing in auto retailing.
A more detailed document will be issued after the Securities and Exchange Commission reviews the preliminary document, which generally takes about a month.
The four dealers include Houston-based SMC Investments, the parent company of Sterling McCall Toyota and Sterling McCall Lexus; Houston-based Smith Automotive Group, with stores in Dallas, Houston, Beaumont and Austin, Texas; A.J. Foyt Honda and Isuzu in Kingwood, Texas; and Bob Howard Motors, which sells 13 car lines in Oklahoma City and expects to purchase a Chevrolet store in Tulsa, Okla.
Charles Smith, the chairman of the American International Automobile Dealers Association, is one of the owners of the Smith group. Hollingsworth has an interest in the Kingwood dealerships.
The group originally included Jimmie Kline, a Washington, D.C., dealer with six Virginia stores. But Kline dropped out of the initiative about two months ago. He did not return phone calls.
Bennett Bidwell, 70, former chairman of Chrysler Corp., is named among the company's directors.