Sonic-RFJ deal closure leads flurry at year end

The blistering pace of dealership buy-sell activity brewing for much of the year is reaching new heights as evidenced by another megadeal and a slew of others that closed last week.

Sonic Automotive Inc. bought RFJ Auto Partners Inc. on Monday, Dec. 6, in what was the third supersized acquisition by a publicly traded group to close this year.

Sonic's $950.2 million purchase included 22 franchised dealerships across Texas, Idaho, Washington, New Mexico, Missouri and Indiana. A group of 11 used-only stores in Washington, Idaho and Montana also were part of the package. Sonic said the transaction is expected to add $3.2 billion in annual revenue.

But Sonic's deal was just one of many completed by public retailers and private groups, large and small, over the past two weeks.

Lithia Motors Inc., which has been credited by buy-sell experts for helping create the swirl of activity this year, bought three Ford dealerships across Michigan and Florida on Nov. 30.

Asbury Automotive Group Inc., whose pending $3.2 billion acquisition of the Larry H. Miller Dealerships group is expected to close by year-end, bought Stevinson Automotive and its eight stores in the Denver area, also on Dec. 6.

Mark Johnson, president of buy-sell firm MD Johnson Inc. in Enumclaw, Wash., said a big year-end push is typical as sellers aim to close deals before the new year to avoid potential negative tax consequences. Capital gains tax rate increases have been proposed by lawmakers, but it's unclear when or whether such a boost might be approved.

This year-end push is unique, however.

"The biggest difference we're seeing is there's a lot of bigger deals just because of what's going on in the capital markets, and Lithia's done a great job of getting people to think about selling," Johnson said.

Take Stevinson Automotive for example, which was just shy of its 60th anniversary next year. President Kent Stevinson met with Erin Kerrigan of sell-side company Kerrigan Advisors of Irvine, Calif., in midsummer to explore possibly selling. Kerrigan then connected with Asbury, which made an unsolicited offer.

"This presents opportunities for us to do some additional things with real estate and such," Stevinson told Automotive News last week. "But with the market and just the whole network of consolidation, we felt it was probably the right time for us."

Beyond Lithia, Asbury and Sonic, at least four other retailers on Automotive News' list of the top 150 dealership groups based in the U.S. bought dealerships in the past two weeks: No. 22 West-Herr Automotive Group Inc., No. 39 Keating Auto Group, No. 60 Ed Morse Automotive Group and No. 101 Morrie's Auto Group.

On the selling side, Prime Automotive, which sold most of its holdings to Group 1 Automotive last month, sold a Toyota store in Lancaster, Mass., on Dec. 7. Prime ranked No. 18 on the list.

AutoFair Automotive Group, which ranks No. 131 on the list, and its seven dealerships across New Hampshire and Massachusetts, was bought by Terry Taylor, through his Automotive Management Services Inc., on Dec. 6.

Continental Motors Group, No. 147 on the list, sold a Honda store on Dec. 6.

Other large private groups also bought stores. Hudson Automotive Group acquired two Mercedes-Benz dealerships in Ohio on Dec. 7 from Peterson Automotive Collection.

"I think it's a good market for buyers and sellers," said Hudson Automotive CEO David Hudson. "There are plenty of good, well-capitalized acquirers that are out there in the market. I think that sellers are getting good value for their businesses if now's the right time to exit."

One broker described the volume of deals as out of the ordinary for year-end. "I think this [past] week will probably be a record week in the history of buy-sells," said Mike Sims, president of Pinnacle Mergers & Acquisitions, a buy-sell firm in Frisco, Texas.

Melissa Burden and John Huetter contributed to this report.