LMP loses big deposit as 5-store deal falls through

A terminated deal to buy five import dealerships in Texas cost LMP Automotive Holdings Inc. a $1.5 million deposit and marks the latest planned acquisition to fall through for the publicly traded company.

LMP, of Fort Lauderdale, Fla., said in a Feb. 3 regulatory filing that its asset purchase agreement to buy dealerships from Steve McGavock was terminated on Jan. 31.

In a Feb. 3 news release, LMP CEO Samer Tawfik said the termination happened "due to the expiration of the closing date deadline."

LMP last year acquired its first franchised dealerships and entered into numerous contracts to buy additional stores. LMP, which in 2020 announced aspirations to roll up dozens of dealerships, now has eight franchised dealerships and four used-vehicle stores in its portfolio. Seven acquisition deals for dealerships are pending.

In September, LMP said it planned to acquire the Texas stores — four Nissan dealerships in Abilene, Amarillo, San Marcos and Lubbock and an Infiniti dealership in Lubbock — from McGavock, principal of McGavock Auto Group. The deal included real estate.

LMP said then that the transaction, predicted to generate $592 million in annual revenue, was slated to close in the fourth quarter of 2021.

The company in a September news release said it would pay about $62.5 million in goodwill for the dealerships and $55 million for real estate. It said it would pay for the acquisition through cash and debt, with up to $6.25 million paid for in LMP common stock. But a regulatory filing that month, which included a copy of the agreement, pegged the purchase price at $61.5 million, of which up to $10 million could be paid for with common stock.

McGavock did not respond to requests for comment about the canceled deal. Brady Schmidt, president of National Business Brokers, the Irvine, Calif., buy-sell firm handling the transaction, declined to comment.

The McGavock deal isn't the first acquisition to be terminated for the fledgling retailer.

In a January regulatory filing, LMP said its planned acquisition of a Hyundai dealership in West Virginia was terminated, on Dec. 31, according to terms in its purchase agreement. LMP in that filing said "the company did not incur any material termination penalties pursuant to such termination."

In December 2020, LMP's first planned franchised dealership acquisition was scuttled after LMP and the seller agreed to terminate LMP's agreement to buy a 75 percent stake in a Toyota dealership in Georgia. That deal was announced in July 2020.

LMP's highest-profile deal to date — the planned purchase of a 70 percent stake in 16 Atlantic Automotive Group dealerships in New York announced in October 2020 — was slimmed down to an eight-store deal and then canceled in February 2021.

The company has announced seven other acquisitions that it had said were slated to close in the fourth quarter of 2021. In the Feb. 3 news release, Tawfik said LMP expects beginning this month to "close substantially all the remaining seven acquisitions under contract in the first quarter of this year on a rolling basis, subject to customary closing conditions, financing and manufacturer approvals."

LMP COO Richard Aldahan last week referred to the company's Feb. 3 news release when asked about its pending acquisitions.

In late December, Tawfik had said in a news release that LMP had "engaged Bank of America" to help it refinance debt.

Tawfik, in the Feb. 3 news release, said his company is continuing to work with "prospective lenders to provide the necessary debt financing to consummate these acquisitions."

Last week, LMP said it plans to sell property in Plantation, Fla., for $4 million. A closing is expected in April. Aldahan, in a Tuesday, Feb. 8, news release, said the site was LMP's leasing and vehicle subscription location and that LMP plans to discontinue operating that business as it focuses instead on its franchised dealerships.

Separately this month, LMP said it would pay $29 million as part of an agreement to buy property in Elmsford, N.Y., to relocate and expand its White Plains Chrysler-Dodge-Jeep-Ram dealership. The retailer acquired an 85 percent stake in that dealership in October. LMP said the property acquisition is expected to close in the second quarter and that it expects to be operating from the site by the fourth quarter.

"This is a trophy property located in one of the best and highest-trafficked areas in Westchester County," Aldahan said in a statement. "The property provides for a significant modernized expansion to service bays, showroom and added parking for hundreds of additional vehicles."

Through the first three quarters of 2021, LMP generated $1.1 million in net income. While it posted losses in the first two quarters, it generated net income of $4.8 million in the third quarter.

As of Sept. 30, LMP had $18.8 million in cash, though it noted more than $10.8 million in cash was restricted. The company plans to release fourth- quarter results on March 31.