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AutoNation bets on FCA, smaller markets

  • August 23, 2015
  • Amy Wilson
  • Automotive News

Retailer eyes biggest deal year since 1999.

AutoNation Inc. is on a store-buying blitz that will make 2015 its biggest acquisition year since 1999 -- and it's not done yet.

With two deals announced last week, AutoNation is making forays into smaller markets and picking up momentum with Fiat Chrysler Automobiles brands. The nation's largest new-car retailer is buying 13 stores in Georgia, Alabama and Tennessee from Carl Gregory Enterprises and three stores near Baltimore from Valley Motors Automotive Group.

Calling the overall acquisition environment "quite positive," AutoNation CEO Mike Jackson told Automotive News, "There's quite a number of willing sellers out there."

AutoNation has several other deals under discussion, he said. While Jackson cautioned that it's never clear such discussions will reach the finish line, he added: "I would be surprised if we did not have another transaction before the year is over."

The 16 stores represent more than $600 million in estimated annual revenue and will bring AutoNation's U.S. store count to 253.

At more than $480 million in revenue, Carl Gregory will be AutoNation's biggest single acquisition since 2001. Carl Gregory stores sold approximately 16,750 new and used vehicles at retail last year. The group is No. 113 on the Automotive News list of the top 150 dealership groups based in the U.S. as ranked by new vehicles sold at retail in 2014.

Carl Gregory's sale is a "harbinger of what's to come," Erin Kerrigan, a buy-sell adviser in Irvine, Calif., said last week in a report on the dealership acquisition market. 

"More large groups are coming to market and successfully selling their dealerships," Kerrigan said. Those large groups, she predicted, could bring average transaction prices of around $200 million. 

By adding six Chrysler-Dodge-Jeep-Rams stores, the Carl Gregory acquisition will increase AutoNation's count with those brands by one-third. AutoNation currently has 12 stores representing all or some of those brands. 

The deal also will expand AutoNation's footprint in the Southeast and take the retailer into smaller markets such as Columbus, Ga.; Johnson City, Tenn.; and Auburn, Ala. 

"We love the future with Fiat Chrysler, particularly the future with Jeep and Ram," Jackson said. He intends to seek more acquisitions that include the Fiat Chrysler brands. 

AutoNation's portfolio had been light on those brands. That is partly because the retailer sold or closed some Chrysler-brand stores in earlier years when the stores struggled, said Alan Haig, a one-time AutoNation executive who is now president of Haig Partners, a buy-sell advisory firm in Fort Lauderdale, Fla. 

"So they're seeing some of those brands grow pretty fast and thinking 'We're not getting our share of that growth,'" said Haig, who represented Valley Motors in its deal with AutoNation.

 

Big deal, smaller cities
AutoNation's purchase of 16 stores in 2 deals gives it more Fiat Chrysler-brand stores and new locations in smaller markets.
     
From Carl Gregory Enterprises:
What   Where
6 Chrysler-Dodge-Jeep-Ram stores   Columbus, Ga. (2); Albany, Ga.; Johnson City, Tenn.; Savannah, Ga.; Brunswick, Ga.
2 Fiat showrooms*   Columbus, Ga.; Johnson City, Tenn.
2 Ford-Lincoln stores   Auburn, Ala.; Fort Payne, Ala.
1 Honda store   Columbus, Ga.
3 Hyundai stores   Columbus, Ga.; Brunswick, Ga.; Albany, Ga.
1 Volkswagen store   Columbus, Ga.
From Valley Motors:
Mercedes-Benz, Audi, Subaru-VW stores   Cockeysville, Md.
     
*Not separate rooftops
Source: AutoNation

In April, AutoNation bought a Chrysler-Dodge-Jeep Ram store in Valencia, Calif., that it had owned previously and sold. 

Jackson noted that AutoNation has always intended to fill out its footprint by expanding into smaller markets. It has had stores in smaller markets such as Amarillo, Texas, and Spokane, Wash., for a while. "We're very good at performing in those markets," he said. 

AutoNation continues its strategy of having a portfolio that is one-third domestic brands, one-third import brands and one-third luxury brands, Jackson said. The Carl Gregory and Valley Motors deals largely boost the domestic and luxury segments of the portfolio. 

The deals are expected to close in October. 

The three Valley Motors stores combined sell Mercedes-Benz, Audi, Subaru and Volkswagen vehicles in the Baltimore suburb of Cockeysville, Md. They generated $129 million in revenue and sold about 2,900 new and used vehicles at retail in 2014. 

Jackson has been talking about finding acquisitions in the Baltimore-Washington, D.C., region since 2011. After the deal closes, AutoNation will have 10 stores in that market. 

Prior to the two new deals, AutoNation's 2015 purchases totaled five stores with combined annual revenue of $320 million. During the first half, it was the second most active among the public dealership groups after Group 1 Automotive Inc., Haig said, but the latest deals likely will put it in the lead, barring equivalent moves from Group 1. 

AutoNation's announced and pending deals for 2015 now represent an estimated $929 million in added annual revenue. That's its biggest total since 1999 and double last year's pace. AutoNation's 2014 purchases had combined annual revenue of $450 million.

 

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