AutoNation Inc.'s largest shareholder, Edward Lampert, has reduced his stake in the nation's biggest dealership group to meet client redemptions from his main hedge fund.
Lampert, a billionaire hedge fund manager who also has a majority stake in retailer Sears Holdings Corp., distributed nearly 11.2 million shares of AutoNation to partners this past Monday, according to a June 12 regulatory filing.
The distribution means Lampert's ESL Investments Inc. was left with a 32 percent stake in AutoNation as of June 10, down from 41 percent, another filing said. At one point in 2010, Lampert controlled 55 percent of AutoNation shares.
But with Sears struggling, clients have been pulling money out of ESL. Lampert used the AutoNation shares to satisfy investors who were redeeming their interests in the fund, filings said.
For AutoNation, the moves led to volatile trading this week, Wells Fargo analyst Matt Nemer wrote in a research report. While the pressure could continue temporarily, Nemer said the change is probably a "net positive" for AutoNation stock.
AutoNation shares today closed at $44.07, up a half percent on the New York Stock Exchange.
"Some investors were uncomfortable with the size of ESL's position, and it also triggered increased scrutiny from the vehicle manufacturers in the form of special franchise/framework agreements," Nemer wrote.
In a Thursday regulatory filing, AutoNation said the Lampert distribution already has led to the termination of an earlier letter agreement with Toyota Motor Sales U.S.A. Inc.
The now-defunct agreement had eliminated any potential adverse consequences under Toyota's framework agreement with AutoNation in the event that ESL and its affiliates acquired more than 50 percent of the retailer's stock. Under the terms of the letter agreement, Toyota's consent to ESL acquiring a 50 percent-plus stake would automatically terminate in the event that ESL's ownership dropped to 40 percent or less.
— Bloomberg contributed to this report.