Asbury could grow to 4th largest group with deal

Nearly two years after purchasing Larry H. Miller Dealerships in one of the largest deals in auto retail history, Asbury Automotive Group Inc. has lined up an encore.

Publicly traded Asbury plans to buy the privately owned Jim Koons Automotive Cos. of the mid-Atlantic in what would be the first dealership megadeal since the frenzied fourth quarter of 2021. That time period, in which fellow public retail giants Group 1 Automotive Inc. and Sonic Automotive Inc. also bought large private groups, solidified the latest era of dealership consolidation.

Asbury, of Duluth, Ga., on Friday, Sept. 8, said it had agreed to spend $1.2 billion to purchase Jim Koons Automotive, a top 25 dealership group. The deal, expected to close in the fourth quarter or early in the first quarter, would add 20 franchised dealerships, six collision centers and one used-car store to its portfolio.

The Koons group reported $3.2 billion in revenue and sales of 26,188 new vehicles in 2022, ranking it No. 23 on Automotive News' list of the top 150 dealership groups based in the U.S. Asbury ranked No. 5 on the list, retailing 151,179 new vehicles last year.

By acquiring Koons, it appears Asbury would pass Group 1 in new-vehicle sales and become the nation's fourth-largest auto retailer behind No. 3 Penske Automotive Group Inc., No. 2 AutoNation Inc. and No. 1 Lithia Motors Inc.

"This acquisition is transformative for our company, enabling Asbury to further expand into one of the country's top economies in one of its fastest growing regions," Asbury CEO David Hult said in a statement.

The longtime family-owned Jim Koons Automotive, of Vienna, Va., comprises domestic, import and luxury brand dealerships in Virginia, Maryland and Delaware. Asbury has just four dealerships in Virginia and none in Maryland or Delaware, according to a second-quarter investor presentation.

"This transaction came together very, very quickly," said Erin Kerrigan, managing director of Kerrigan Advisors. "And I think it's indicative of how valuable the Koons group is and the fact that it is in one of the best markets in the country."

Kerrigan Advisors, a sell-side firm in Incline Village, Nev., is representing Koons.

"We view this transaction very favorably in that it appears to be a good strategic and cultural fit," Seaport Research Partners analyst Glenn Chin wrote in an investor note Friday.

Asbury generated $15.4 billion in revenue in 2022 and wants to grow to $32 billion by 2025. In April 2022, Asbury said it expected $6.2 billion of its revenue growth would come via acquisitions. That figure has since been updated to $6.9 billion, according to the second-quarter investor presentation.

The Koons purchase would put Asbury nearly halfway toward that goal.

"The dealership group itself makes sense geographically, it makes sense OEM-wise and very much fits with the strategy they laid out," Daniel Imbro, an analyst with Stephens Inc., told Automotive News. "They've talked for 18 months about 'Once we get balance sheet leverage back down to a comfortable place, we would be looking to be more active on the M&A side and deploy capital towards growth.' And that's what they're doing."

While Asbury hasn't made any acquisitions since it bought Larry H. Miller, it has been active on the sell side. Most notably, it sold nine North Carolina dealerships to Hudson Automotive Group in December.

John Huetter and Julie Walker contributed to this report.