Lithia buys 9 stores in Calif., Ariz.

Lithia Motors Inc. has purchased nine dealerships from the Keyes Automotive Group estimated to generate $1.4 billion in annual revenue as the nation's third-largest new-vehicle retailer continues to grow.

Lithia said Tuesday that it acquired nine of Keyes' 14 stores, adding to its presence in Southern California and providing entry into the Phoenix market. The acquisition closed Nov. 2. Terms were not disclosed.

It's one of the industry's largest transactions in recent years based on dealership revenue. Keyes is ranked No. 20 on Automotive News' list of the top 150 dealership groups based in the U.S., retailing 33,233 new vehicles in 2019 and generating more than $2 billion in revenue.

Lithia shares rose 3.5 percent to close at $267.88 on Tuesday.

The Medford, Ore., retailer purchased from Howard Keyes and Howard Tenenbaum these stores: Keyes European/Mercedes-Benz, Keyes Audi, Keyes Mission Hills Hyundai, Keyes Hyundai of Van Nuys, Keyes Lexus, Keyes Toyota, Keyes Lexus of Valencia and Audi Valencia, all near Los Angeles, and Bell Road Toyota in Phoenix.

"The Keyes acquisition adds approximately 800 new customer care associates and expands the reach of our omnichannel strategy into new markets," Lithia CEO Bryan DeBoer said in a statement. "Growing our network with new-vehicle locations increases our competitive advantage to procure used-vehicle inventory and provides the ability to complete in-home and in-network solutions to our customers throughout their entire vehicle ownership life cycle."

Included in the deal are some of the highest-volume U.S. dealerships for their respective brands, said Erin Kerrigan, managing director of Kerrigan Advisors, an Irvine, Calif., sell-side firm that represented the seller in the transaction.

Jerry Keyes, Howard Keyes' father, founded the dealership group in 1950 in Van Nuys. Today, the group is ranked among the highest-revenue dealership groups in the country.

"I am deeply grateful for the decades of support we have received from the communities where we have been proud to do business and for the employees who have dedicated their time and effort to achieving top customer service and exceptional retail success," Howard Keyes said in a statement.

Tenenbaum, in a statement, added: "We are excited to pass the Keyes' torch onto Lithia Motors, who will take these dealerships to the next level, further growing the business in a way that our communities will be proud of."

Keyes Automotive is keeping Keyes Honda Van Nuys, Keyes Chevrolet, Keyes Woodland Hills Honda and Porsche Woodland Hills in the Los Angeles market and Centennial Toyota in Las Vegas.

Lithia, through the third quarter, had acquired 17 dealerships this year expected to generate $1.75 billion in annualized revenue.

The company wants to grow annualized revenue to $50 billion by 2025. To help get there, it plans to acquire dealerships generating $4 billion in revenue annually as part of a five-year plan.

Lithia, in its third-quarter earnings call, said it had purchase agreements for dealerships generating about $2 billion in annual revenue that were expected to close by the end of this year. The retailer also said it had letters of intent to purchase more dealerships in early 2021 that are expected to generate about $3 billion in annual revenue.

Lithia said it used capital recently raised through equity and debt offerings to pay for the Keyes transaction.