Lithia acquires Canada's Pfaff Automotive dealership group

Lithia Motors Inc., in another transaction supporting its aggressive expansion plan, said Tuesday it acquired Canadian dealership group Pfaff Automotive Partners.

The announcement confirms the imminent deal first reported by Automotive News in July.

Terms of the transaction were not disclosed, but a Pfaff spokesman said the Canadian group retains an undisclosed equity stake in the operation. The deal closed Monday.

It marks Lithia’s first international acquisition as the second-largest U.S. dealership group also targets a goal of 500 domestic locations. Lithia said the acquisition will bring its expected 2021 annualized revenue from acquisitions to $5.9 billion. The Canadian dealerships are expected to generate more than $1 billion of that for Lithia, headquartered in Medford, Ore. The deal was financed with "existing on-balance sheet capacity," Lithia said.

Pfaff, headquartered in Toronto, operates 16 dealerships across Canada — 11 of them in the Toronto area, the largest market in the country. It also has stores in Vancouver, British Columbia, and Calgary, Alberta. Pfaff's Mercedes-Benz and Harley-Davidson dealerships were not part of the acquisition.

"Canada has been our top target for growth outside of the United States with its similar business practices and a market opportunity of five million new and used cars sold annually," Lithia CEO Bryan DeBoer said in a statement. "Beyond its size, Pfaff has an excellent management team, and its locations provide an ideal hub for further expansion.”

DeBoer praised Pfaff’s best-price-first approach and captive in-house leasing option, saying Pfaff “perfectly aligns with our technology-enabled online offerings.”

The acquisition of Pfaff makes Lithia the second publicly traded dealership group operating in Canada. AutoCanada, based in Edmonton, Alberta, was the sole public dealership group in the country.

The Pfaff brand will remain, and Chris Pfaff, whose father, Hans, founded the company in 1964, will continue to serve as president and CEO. A Pfaff spokesman said the entire management team will stay on board to run the brand.

The deal also means Lithia will bring its Driveway omnichannel digital retailing platform north of the border.

DeBoer previously said that early learnings from Driveway, rolled out one year ago, demonstrate the potential for the platform to dominate both "domestically and internationally." 

Omnichannel refers to technology and processes aimed at providing a seamless buying experience for consumers whether they shop online, in-store or both.

Chris Pfaff said in a statement that there currently isn’t a “nationwide, e-commerce player in Canada.”

"This partnership is borne out of a relationship that spans five years, and we are confident that the cultural alignment between our organizations makes this the perfect launch point for Lithia and Driveway in Canada," he said.

With a market cap of $11.55 billion — and 263 dealerships in its portfolio before the Pfaff deal, according to the company’s website — Lithia has greater access to capital for expansion than every other dealership group in Canada by a wide margin.

Shares in Lithia gained 1.1 percent to close Tuesday at $331.25.

Lithia ranked No. 3 on Automotive News' most recent list of the top 150 dealership groups based in the U.S., with retail sales of 171,168 new vehicles in 2020. But with its April acquisition of 34 stores from Michigan's Suburban Collection, Lithia passed Penske Automotive Group to become the country's second-largest dealership group.