Group 1 takes hold of most Prime dealerships

Group 1 Automotive Inc. last week purchased 28 of 30 Prime Automotive Group dealerships that were part of an $880 million acquisition announced in September. One Toyota store was dropped from the deal because of limitations posed by Group 1's framework agreement with the automaker, while the status of a Subaru dealership remains up in the air.

On Wednesday, Nov. 17, Group 1 bought 27 dealerships from Prime, plus three collision centers and real estate, and then the next day closed on Prime Toyota-Saco in Maine.

Group 1 executive Pete DeLongchamps told Automotive News that the nation's fourth-largest new-vehicle retailer came to an agreement with Toyota to remove one of two Toyota dealerships from the transaction. Framework agreements between large dealership groups and automakers can limit how many stores of the same brand a retailer can operate in certain regions.

Also this year, Group 1 bought Hyannis Toyota and Orleans Toyota in Massachusetts from Prime.

"We are allowed to have a certain amount of stores in a geographic region, and, through this acquisition, we exceeded it," said DeLongchamps, Group 1's senior vice president of manufacturer relations, financial services and public affairs.

Prime is now under contract to sell the dropped store, Toyota Route 2 in Lancaster, Mass., to dealer Kurt Koch in the next few weeks, according to a source familiar with the plans. Koch, who owns several dealerships, did not respond to a request for comment.

The other store not yet purchased as intended is Prime Subaru of Manchester in New Hampshire. For now, Prime will continue to run that dealership.

Group 1 declined to comment on the situation involving the Subaru store, and an executive for Subaru of New England, the distributor overseeing the dealership, did not respond to a request for comment.
Group 1 did buy two other Subaru dealerships as part of the Prime transaction — one that required approval from the automaker itself, Subaru of America Inc., and the other from Subaru Distributors Corp., a distributor that covers parts of New York and New Jersey.

Prime's only other remaining dealership — a Land Rover store in Hyannis, Mass., that was not part of the planned Group 1 transaction — closed last week. Customers were referred to Prime's Land Rover store in Hanover, Mass., now owned by Group 1.

DeLongchamps declined to comment on adjustments to the purchase price given the changes.

Group 1 on Tuesday, in a regulatory filing, said it paid about $828.4 million for 28 Prime stores. It also confirmed in the filing that it has one dealership that it has “not received approval for transfer” from the manufacturer.

Most of Prime's executive management team, including CEO Todd Skelton and COO Pete Lebish, won't move to Group 1, sources told Automotive News.

"We've retained their general managers, and the dealership operational teams are staying in place," DeLongchamps said.

The acquisition gives Group 1, of Houston, more scale in the Northeast and will help it expand digital retailing platform AcceleRide. The company, which now has 217 dealerships in the U.S., United Kingdom and Brazil, said it has completed acquisitions this year that will add $2.4 billion in annual revenue.

The Prime acquisition "will further leverage our cost structure, diversify our footprint, and broaden our customer base," Group 1 CEO Earl Hesterberg said in a statement.

Group 1 plans to change the names of some former Prime stores to incorporate the Ira brand name it already uses in parts of the Northeast.

"The Ira name has a rich history in the New England area, and we're pleased to rebrand the Prime stores to Ira wherever possible," DeLongchamps said.

The Ira name comes from Ira Rosenberg, who with son David Rosenberg in 2000 sold five Massachusetts stores to Group 1. Ira Rosenberg later became co-founder of Prime Motor Group, which in 2017 combined with GPB Capital Holdings' Capstone Automotive Group to form Prime Automotive.

The Group 1 acquisition puts Prime closer to closing a cloudy chapter.

The Westwood, Mass., group in the past several years had grown to one of the largest dealership groups in the country and was most recently ranked by Automotive News' as the 18th-largest new-vehicle retailer in the U.S. But its majority owner, GPB, an alternative-asset management firm, was accused this year of operating a Ponzi-like scheme by the U.S. Securities and Exchange Commission and faces numerous lawsuits and state inquiries.

Former GPB CEO David Gentile and two associates were indicted in February on federal charges including securities fraud. A federal monitor was appointed to oversee GPB Capital and Prime dealership operations as part of the SEC case.

Most 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.

"This transaction delivers significant value for GPB Capital's investors and gives Group 1 access to 1,800 dedicated employees and more than two dozen of the best dealerships in the Northeast," GPB Capital CEO Rob Chmiel said in a statement. "We are actively working with our independent monitor on a plan to distribute the available proceeds from the transaction to GPB Capital's partnership investors."

The monitor, Joe Gardemal of Alvarez & Marsal in Washington, D.C., did not respond to requests for comment.