Private equity fuels more dealership purchases

Consolidation among large dealership groups continues going into 2017.

The George Soros-backed McLarty Automotive Group snapped up Asbury Automotive Group Inc.'s stores in Arkansas last week. Meanwhile, Gee Automotive Cos., of Spokane, Wash., agreed to buy much of the larger Ron Tonkin Family of Dealerships, of Portland, Ore.

Look for more cases of minnows swallowing whales, said Erin Kerrigan, managing director of Kerrigan Advisors in Irvine, Calif., which represented the Tonkin family in the transaction. "Transactions like this are going to be more common," she predicted, with the new entity designed to be "led by a younger operator, to grow and expand in a region."

Gee CEO Ryan Gee, 41, said this deal is the "next step" in the group's plan to buy more stores along the West Coast. "We're focused on purposeful growth," Gee told Automotive News.

He declined to specify a timeline. "We first want to integrate the Tonkin group into our group and make sure we've done that successfully before we look at the next [buy] opportunity," he said.

The acquisition will add $1 billion in estimated annual revenue to Gee Automotive's current $500 million, he said.

Terms of the deal were undisclosed, but Gee confirmed that outside investors are involved. "We don't want to comment on the specifics on how the deal is financed," he said. "It's not institutional private equity, I'll tell you that. But it's organized with a like-minded group of investors. It's long-duration capital."

Ed Tonkin, co-president of the Ron Tonkin group, said the investors will support long-term growth. "They have private equity investors. But it's evergreen capital. It's 100-year capital, so this is not a case of somebody who wants to turn it in a few years," Tonkin said. "We wouldn't have aligned ourselves with such a company."

The two dealership groups sold a combined 38,771 new and used vehicles last year.

Founded in 1983, Gee Automotive has seven franchised dealerships in Washington, Oregon and Idaho.

The Ron Tonkin group ranks No. 93 on Automotive News' list of the top 150 dealerships based in the U.S. It owns 21 dealerships, mostly in the Portland area, selling 20 brands. The Tonkin group is selling 16 of those dealerships, said Ed Tonkin.

After the acquisition closes, Gee Automotive will own 23 dealerships and employ about 1,500 full-time employees, Gee said.

Ron Tonkin opened his first store, Ron Tonkin Chevrolet, in 1960. He was the National Automobile Dealers Association president in 1989. He died in 2014. His son, Ed Tonkin, 62, was NADA chairman in 2010. NADA changed the position's title in 1998.

Another son, Brad Tonkin, 57, is co-president of the Ron Tonkin group. He will move to Gee Automotive as a platform president. Ed Tonkin's son, Adam Tonkin, 34, will continue to run Ron Tonkin Chevrolet in Portland.

In Arkansas, McLarty Automotive purchased five dealerships and two collision centers from Asbury, of Duluth, Ga., adding to the four Arkansas dealerships that it bought last year from Asbury.

With this deal, Asbury has sold all of its former Arkansas dealerships to McLarty Automotive, of Little Rock, Ark. The deal brings McLarty's annual revenue to more than $1.4 billion and its store count to 19.

Mark McLarty founded the group in 2014 with the backing of the family investment arms of billionaire financier Soros, drugstore enterprise founder Stephen LaFrance Sr. and transportation mogul J.B. Hunt. Former Asbury CEO Charles Oglesby runs it. c