Republic Industries Inc. will acquire four new-car dealer groups. The Fort Lauderdale, Fla., conglomerate went on a shopping spree in 1997, but this is only the second such announcement for 1998.
The four dealer groups will add $500 million annual revenue to Republic's automotive retail operations. Republic's biggest prize was the Austin, Texas, dealerships of veteran dealer Red McCombs.
With a buying binge that started in late 1996 and continued through 1997, Republic came from nowhere to become the nation's largest dealer group. The company has purchased or announced its intention to purchase 59 dealer groups with about 300 franchises and 1997 revenues of about $7.5 billion.
Republic has slowed its acquisition pace, spending its energy consolidating its gains from 1997. On Feb. 19, Republic said it would buy Webb Automotive Group in Irvine, Calif., for $112 million. On April 22, Republic unveiled plans to buy Driver's Mart Worldwide Inc., a chain of used-car franchises, for $40 million.
Republic's latest moves depart from past practice in a couple of ways. The company usually divulges a transaction price but declined to do so this time. And Republic will buy only the Austin stores of McCombs Automotive, not the San Antonio dealerships. In almost all of its previous deals, Republic has bought new-car dealer groups lock, stock and barrel.
The McCombs group is No. 6 on Automotive News' list of top 100 dealer groups; its 1997 sales were $1.3 billion. McCombs' Austin dealerships had sales of about $290 million last year.
Republic also is buying Steve Rayman Pontiac-Buick-GMC in Atlanta, which had sales of $70 million in 1997; the Peyton Cramer Ford and Infiniti dealerships in Torrance, Calif., with revenues of $100 million; and Bob Townsend Ford in Cincinnati, with sales of $40 million.
Republic is diverging from its 1997 practice of paying for acquisitions primarily in shares of stock. The company believes its stock is undervalued at current share prices, and therefore paying in cash may be cheaper. Republic wants to preserve its option to pay in cash or stock until the transactions officially close, said Jim Donahue, Republic vice president of corporate communications.
McCombs, 70, said his dealerships control about 12.5 percent of the Austin new-vehicle market. Donahue said the acquisition of McCombs Chevrolet, GMC, Jeep, Hyundai and Toyota franchises and Hendrix GMC and Isuzu Truck (also part of McCombs) in Austin establishes a Republic retail 'cluster' in Austin. An AutoNation USA used-car store is scheduled to open next year across the street from Red McCombs Chevrolet.
Republic has established these groupings in the Atlanta and Los Angeles areas. The Townsend purchase would be the company's first new-car dealership in Cincinnati, where it already operates an AutoNation USA store.
McCombs said he is selling four San Antonio dealerships to other dealers. He will keep 12 franchises at six San Antonio locations.
McCombs, who started as a used-car dealer in 1953 and whose first new-car store was an Edsel dealership, said his first contact with Republic was through his relationship with its chairman and co-CEO, H. Wayne Huizenga.
'I was a very outspoken advocate for the various consolidators' programs when they first began this move, and a lot of my dealer friends saw that as heresy,' he said. McCombs said he is also a believer in the retail network consolidations being spearheaded by Ford Motor Co. and General Motors.