Sonic Automotive to acquire 33-store RFJ Auto Partners in $700M deal

Sonic Automotive Inc. said it agreed to acquire RFJ Auto Partners Holdings Inc., one of the largest privately owned dealership groups in the U.S., in the latest auto retail megadeal.

Sonic on Wednesday said the $700 million purchase of RFJ Auto's portfolio of 33 franchised and used-vehicle dealerships in seven states and real estate is expected to add $3.2 billion in annual revenue.

Sonic said the platform of stores last year generated $2.8 billion in annual revenue.

The deal is expected to close in December. Sonic shares rose 2.3 percent to close at $55.01 in New York.

"RFJ Auto's management team — many of whom are former members of the Sonic family and have deep familiarity with our guest-centric mindset and innovative sales model — and the nearly 1,700 RFJ Auto teammates are an excellent fit with the culture and growth strategy of our franchised dealership business," Sonic CEO David Smith said in a statement.

RFJ Auto, based in Plano, Texas, formed in February 2014 when automotive retail veteran Rick Ford partnered with Jordan Co., a New York private equity firm. RFJ's dealership footprint is largely in Texas and the Northwest, but it also has a presence in Indiana, Missouri and New Mexico.

RFJ Auto's brand portfolio is made up of Alfa Romeo, Chrysler, Dodge, Jeep, Ram, Chevrolet, GMC, Buick, Lexus, Toyota, Ford, Nissan, Hyundai, Honda and Mazda. RFJ Auto also has a group of used-vehicle-only stores across several states.

Sonic said the deal will add six new states to its footprint: Idaho, Indiana, Missouri, Montana, New Mexico and Washington. It will also add five new brands to its portfolio: Chrysler, Dodge, Jeep, Ram and Mazda.

RFJ Auto ranked No. 42 on Automotive News' most recent list of the top 150 dealership groups based in the U.S., with retail sales of 19,705 new vehicles and 28,448 used vehicles in 2020. The Automotive News list is ranked by new-vehicle sales. Sonic noted in its announcement that RFJ is in the top 15 of U.S. dealership groups when ranked by total revenue.

Ford, 58, will stay on with Sonic after the transaction closes as head operator of the RFJ Auto platform, a Sonic spokeswoman said.

Ford started working at dealerships as a teenager, changing oil in the service department. He then began selling used cars at 18 at an Oldsmobile store and worked his way up in the business. Before launching RFJ, he had been a dealership owner and had worked as a platform manager at both AutoNation Inc. and Sonic. Ford was a partner and COO at Randall Reed's World Class Automotive Group just before starting RFJ.

Ford also is familiar with big acquisitions. In 2014, RFJ Auto bought 13 dealerships. In April 2015, RFJ bought the massive Dave Smith dealership operation, a Chrysler-Dodge-Jeep-Ram store and a Chevrolet-Cadillac-Buick-GMC store, in Kellogg, Idaho. Dave Smith Motors is the highest volume Chrysler-Dodge-Jeep-Ram dealership in the world based on new vehicle sales, Sonic noted.

Ford was a 2015 Automotive News All-Star for the dealer privately held category.

"I am excited to once again work alongside Rick and his team as they remain in place to manage and accelerate our growth trajectory under this new partnership," Sonic President Jeff Dyke said in a statement.

Sonic said it would pay for the RFJ Auto deal using cash and financing.

Investment bank Lazard was Sonic's financial adviser in the transaction, while investment bank Cowen was RFJ Auto's financial adviser.

Sonic, which acquired a Colorado Audi-Volkswagen dealership in August and two other dealerships in Colorado in July, had indicated it would acquire more stores before the end of the year.

The deals this year mark a return to acquisition mode for Sonic.

Sonic's July purchase of Grand Junction Subaru and Grand Junction Volkswagen were the group's first acquisitions since November 2014.

"We've just never been in a position in years to buy franchised stores from a financial perspective, and now we've really shored up our balance sheet," Dyke told Automotive News in July. "We're in great shape from a liquidity perspective [and] have plenty of access to capital. There are a lot of stores for sale."

On the megadeal front, Sonic's move to acquire RFJ Auto follows Group 1 Automotive Inc.'s pending deal for Prime Automotive Group, announced last week, and Lithia Motors Inc.'s April acquisition of Michigan's Suburban Collection, a group of 34 stores and 56 franchises.

Sonic, of Charlotte, N.C., ranked No. 7 on Automotive News' most recent list of the top 150 dealership groups based in the U.S., with retail sales of 93,281 new vehicles in 2020. It retailed 159,025 used vehicles last year, making it No. 6 on Automotive News' list of the top 100 used-vehicle retailers.

Sonic has 87 franchised dealerships and 30 EchoPark used-vehicle stores and delivery centers. Sonic aims to have 140 EchoPark locations nationwide by 2025.

In late July, Sonic revealed it was launching a strategic review of its EchoPark used-vehicle operation. One analyst covering Sonic speculated that the EchoPark review could be the precursor to a spinoff of the rapidly growing business.