Group 1 to buy 30 Prime Automotive stores for $880 million

Public auto retailer Group 1 Automotive Inc. said Monday that it has agreed to acquire Prime Automotive Group, one of the largest privately owned dealership groups in the U.S.

Group 1 said the $880 million purchase includes nearly all of Prime's assets, 30 stores, three collision centers and real estate. It said the platform of stores last year generated $1.8 billion in annual revenue and the stores sold more than 52,000 new and used vehicles.

The acquisition of Prime, based in suburban Boston, will significantly boost the store count for Group 1, particularly in the Northeast. A closing is slated for late November.

"We know Prime's markets well and the opportunities they represent," Daryl Kenningham, Group 1's president of U.S. and Brazilian operations, said in a statement. "We are also proud to welcome Prime Automotive's 1,800 employees as new teammates to the Group 1 family. The addition of Prime Automotive enables us to extend our reach of AcceleRide, Group 1's industry leading digital retailing process, to even more customers."

The Group 1-Prime transaction would be the second megadeal of the year for dealership buy-sells. In April, Lithia Motors Inc. bought Michigan's Suburban Collection, a group of 34 stores and 56 franchises.

Automotive News reported last month that the Prime group was up for sale and that a sale was likely to happen by the end of the year. A dealer told Automotive News last month that Jefferies Financial Group was working with Prime to market the platform.

Prime ranks No. 18 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 31,529 new vehicles in 2020. It generated more than $2.6 billion in revenue last year.

In the past few years, Prime has sold more than a dozen stores that weren't in its core Northeast market. This year, Prime sold five dealerships, including two Massachusetts Toyota stores, which Group 1 purchased in March.

Prime's majority owner, GPB Capital Holdings, has been ensnarled in numerous lawsuits and this year was accused by the U.S. Securities and Exchange Commission of operating a Ponzi-like scheme. A federal monitor was appointed to oversee GPB Capital and dealership operations as part of the SEC case, which was filed in February.

Most of the dealerships involved in the sale are part of the GPB Automotive Portfolio, a limited partnership made up of thousands of investors who raised $682.9 million. GPB used the funds to buy dealerships. Investors were promised 8 percent annual returns, but distributions stopped in late 2018.

The Prime transaction must be approved by the monitor, Group 1 said in a regulatory filing. 

Group 1 said it would pay for the deal using cash, lines of credit and financing. The retailer said that it has entered into an agreement with Wells Fargo for a $250 million bridge loan to help pay for the transaction.

A spokeswoman for Prime referred comment to Group 1 and a spokesman for GPB could not immediately be reached for comment. 

Group 1 of Houston ranks No. 4 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 140,221 new vehicles in 2020 and generating revenue of more than $10 billion.

Group 1 has 188 dealerships in the U.S., U.K. and Brazil, plus 48 collision centers. It has eight locations in Massachusetts, four in New Hampshire and five in New Jersey, according to its website. Maine and New York would be new states for the group.

A large proportion of Group 1's dealerships are in Texas.

Once the Prime stores are acquired, Group 1 said it will have 147 U.S. dealerships, including 46 Northeast locations.

The public auto retailers, family offices and some large private dealers were thought to be interested in buying Prime, which has stores in New York, New Jersey, Massachusetts, New Hampshire and Maine.

Group 1 said it has already acquired dealerships representing $420 million in annualized revenue this year and with the Prime deal will have acquired dealerships representing at least $2.25 billion in revenue.

Group 1 CEO Earl Hesterberg in July told analysts that Group 1 expected to "announce some U.S. acquisitions in the months ahead." The public retailer in July said it bought seven dealerships in the U.K.

The company has said this year that it has financial capability to add $1 billion or more in annual revenue through acquisitions.

"We continue to prioritize external growth in our capital allocation process, and we're optimistic that we will have beneficial opportunities as the year progresses," Hesterberg told analysts in July.