Lithia Motors Inc. said it completed the purchase of DCH Auto Group Inc., one of the largest buy-sell deals between dealership groups in recent history.
The acquisition is expected to bring nearly $2.3 billion in additional annualized revenue to Lithia. In 2013, Lithia’s revenue rose 21 percent to $4.01 billion.
DCH is one of the 10 largest dealership groups in the country. It has 27 dealerships in Southern California, New Jersey and New York. It will be combined with Lithia’s 101 stores in the West. Lithia, headquartered in Medford, Ore., ranks No. 8 on the Automotive News list of the top 125 U.S. dealership groups, with retail sales of 67,177 new vehicles in 2013.
Lithia, which announced the closing in a statement Wednesday, expects the combined entity to give it access to a wider swath of potential acquisitions. Lithia’s growth strategy has been to snap up exclusive franchises in small to medium markets, while DCH’s talent is buying dealerships in large metropolitan markets.
‘Strategic partner’
“For the past several years, we have been seeking a strategic partner to help us to enter the eastern United States. The DCH organization is an ideal fit with our existing team,” Lithia CEO Bryan DeBoer said when Lithia unveiled the deal in June.
He added, “Together, the organization will be able to grow in multiple markets, learn from each other, and deliver improved efficiencies due to scale.”
Lithia paid about $364 million in cash. It issued 268,770 shares in stock, incurred $230 million of vehicle floorplan debt financing and assumed nonfloorplan debt of $53 million to complete the transaction.
Lithia also raised its syndicated credit facility by $700 million and will increase outstanding mortgage debt by $100 million, it said.
Lithia has about $190 million in remaining liquidity.
Brand mix
The combined group’s brand mix is more diversified, with about 47 percent Honda and Toyota, 30 percent domestic and about 23 percent other brands.
DCH’s management will continue to run the stores, with George Liang, DCH president, reporting directly to DeBoer.
“Since the announcement of our combination in June, we have visited each of the DCH stores with their management team and believe our similar cultures and values, along with empowered store leadership, will position us for success now and in the future,” DeBoer said in a statement.
He added that Shau-wai Lam, DCH’s founder and chairman emeritus, is expected to join Lithia’s board of directors in April 2015.
