Calling the integration of DCH Auto “ahead of expectations,” Lithia Motors modified its earnings guidance and hinted at where the dealer group might expand next because of the successes of bringing those other 27 stores into its portfolio.
Lithia chief executive officer Bryan DeBoer acknowledged that the company originally expected to realize synergies from the DCH acquisition during a two-year transition phase. During the company’s recent conference call to highlight its second-quarter financial and sales report, DeBoer touched on how much quicker that deal enhanced Lithia’s performance.
“The ability of DCH's team to drive change has allowed us to accelerate the process of realizing these savings and is now mostly complete,” DeBoer said. “Despite the realized corporate synergies, many opportunities remain for continued organic growth.
“Clear and transparent performance expectations allows our leadership to continue to drive results towards industry leading benchmarks,” he continued. “The performance of Lithia and DCH stores have allowed us to increase our guidance.”
Lithia now is projecting that its third-quarter earnings will improve from $1.83 to $1.87 per diluted share and full-year earnings will tick up from $6.63 to $6.72 per diluted share. Both projections are based on the following annual assumptions:
— Total revenues of $7.6 to $7.8 billion
— New-vehicle sales increasing 45.0 percent
— New-vehicle gross margin of 5.9 percent to 6.1 percent
— Used vehicle sales increasing 40.0 percent
— Used vehicle gross margin of 12.6 percent to 12.8 percent
— Service body and parts sales increasing 42.0 percent
— Service body and parts gross margin of 48.8 percent to 49.2 percent
After articulating the earnings projections, DeBoer reflected on what the company has “learned” since DCH came into the fold last year.
“The DCH acquisition really taught us that as a management team we have built an autonomous type of company that the top level is there to really inspire and challenge and set clear expectations for the divisions,” he said. “So I think in terms of the perspective of acquisitions, we believe that our staple diet of one and two acquisition-type of dealerships, we still always continue.
“However, the idea of larger groups is something that will be much more simple and easier to integrate in the future especially now knowing that we can grow in both metro markets as well as in our typical exclusive markets,” DeBoer continued.
So could the Lithia footprint reach the Big Apple or the City of Angels? DeBoer didn’t seem to be ruling out the possibility and potentially “play a little bit of our previous expectations.”
He added, “I think the biggest thing that we have with DCH at this stage is the ability to open up that second door in the metro markets for growth. The ability for us to leverage their people which are very stable, they were very progressive, they are inventive, is exciting for us.
“We are looking in both metropolitan areas as well as our typical exclusive areas,” DeBoer went on to say. “I would say that our closest deals are the traditional exclusive deals. However, we have a good handful of deals that are percolating in both the LA and the New York markets, and we look forward to announcing in the coming quarters our first deal on the DCH side.”
DeBoer closed the topic by noting Lithia’s typically acquired stores that management believed to be generating average sales or perhaps even underperforming. Once acquired, DeBoer reiterated that the dealership is filled with Lithia employees who have a track record of doing well.
“We have always said that people drive the performance in stores,” DeBoer said. “We believe if the store and the franchises are the right franchises for the area, then it's a matter of bringing in new talent, and we can realize the synergies and the advantages that maybe have not been realized.”
In the second update since the development first came to light, Cox Automotive and Dealertrack Technologies said on Friday that they have each received a request for additional information and documentary material from the U.S. Department of Justice in connection with the DOJ’s review of Cox Automotive’s pending acquisition of Dealertrack.
Company officials insisted that issuance of the second request is a standard part of the regulatory process. They explained the effect of the second request is to extend the waiting period under the Hart-Scott-Rodino Act until 10 days after Cox Automotive has substantially complied with the second request, unless that period is terminated earlier by the government.
The companies added the expectation that the acquisition will close in the third quarter of this year remains unchanged.
“The second requests relate only to a very small portion of the parties’ businesses, and the parties are working cooperatively and expeditiously with the DOJ in connection with its review,” Cox Automotive and Dealertrack said.
As a result of the second requests, pursuant to the agreement and plan of merger dated June 12 by and among Cox Automotive, Runway Acquisition Co., and Dealertrack, Cox Automotive has extended the offering period of its previously announced tender offer to purchase all of the outstanding shares of common stock of Dealertrack for $63.25 per share. That figure is net to the seller thereof in cash, without interest and subject to any withholding taxes required by applicable law and upon the terms and subject to the conditions set forth in the offer to purchase dated June 26.
Officials noted the Offer, which was previously scheduled to expire at midnight ET on Friday, has been extended until midnight ET on Aug. 21, unless it is extended further under the circumstances set forth in the merger agreement.
“All terms and conditions of the offer shall remain unchanged during the extended period,” officials said.
American Stock Transfer & Trust Co., the depositary for the offer, advised Cox Automotive and Dealertrack that as of 5 p.m. ET on Thursday approximately 17,038,691 shares of Dealertrack had been validly tendered and not validly withdrawn pursuant to the offer. That figure represents approximately 30.31 percent of Dealertrack’s outstanding shares.
“Shareholders who have already tendered their shares of Dealertrack do not have to re-tender their shares or take any other action as a result of the extension of the expiration date of the offer,” officials said.
“The acquisition is subject to a minimum tender of at least a majority of outstanding Dealertrack shares on a fully diluted basis, customary regulatory approvals and closing conditions,” they added.
Cox Automotive and Dealertrack previously made moves associated with their DOJ requirements back on July 6.
LeasePlan Corp. — the European parent company of LeasePlan USA — announced on Thursday that it’s being acquired by a consortium of long-term investors.
Officials said the total value of the transaction amounts to about 3.7 billion Euros. They added the consortium plans to maintain LeasePlan’s diversified funding strategy going forward, supported by its investment grade rating.
The agreement is subject to approval by the relevant regulatory and anti-trust authorities, including the European Central Bank in consultation with the Dutch Central Bank.
The company indicated the closing is expected by the end of 2015 and is subject to obtaining these regulatory and anti-trust approvals.
LeasePlan highlighted the Consortium is composed of a group of long-term investors and includes:
— Dutch pension fund service provider PGGM
— Denmark’s largest pension fund ATP
— GIC
— Luxinva S.A., a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA)
— The merchant banking division of Goldman Sachs
— Investment funds managed by TDR Capital
“The consortium supports LeasePlan’s existing long-term strategy and growth ambitions and recognizes the expertise of its workforce as a key asset for successfully executing this strategy,” officials said.
“The consortium brings financial services sector experience, additional strategic experience as well as a strong track record of successful long-term investing,” they continued.
“LeasePlan will continue its drive for the delivery of high quality fleet management and driver mobility services for its clients,” officials went on to say.
Looking back at LeasePlan’s 2014 performance, the company highlighted that its results showed a successful continuation of its strategic path of sustainable growth with total assets up 3 percent to 19.7 billion Euros and net profit up 14 percent to 372 million Euros.
The total number of vehicles under management increased from 1.37 million in 2013 to 1.42 million at the end of last year.
Eric-Jan Vink of PGGM, on behalf of the consortium, said, “As market leader in the global fleet management business, LeasePlan offers an attractive long-term investment opportunity. We are investing in the future of a company with an unmatched portfolio of market-leading assets, a highly knowledgeable and dedicated employee base and a sound strategy for the future, under highly experienced management.
“The consortium looks forward to supporting the management team as they focus on growing the business,” Vink added.
LeasePlan has been informed that the consortium intends to finance the acquisition with an equity investment of approximately half of the total purchase price, a mandatory convertible note of 480 million Euros and a cash-pay debt facility of EUR 1.55 billion Euros.
Officials noted the debt facility is being provided by an international syndicate of lenders. They added none of the debt raised by the investors would be borrowed by LeasePlan and the company would not be responsible for the repayment of such debt.
The consortium plans to maintain LeasePlan’s diversified funding strategy going forward, supported by its investment grade rating.
Furthermore, the consortium supports LeasePlan’s existing management and strategy as Vahid Daemi will continue to lead the organization as chief executive officer and chairman of the managing board.
“The change of ownership announced today marks a new era for our company and will enable LeasePlan to continue our successful journey and focus on executing our long-term strategy and growth ambitions,” Daemi said.
“We remain fully committed to providing high quality and innovative fleet management and driver mobility services to our clients worldwide,” Daemi continued.
Officials indicated LeasePlan will continue to operate as a strategically and operationally independent company. The consortium intends to appoint additional independent members to the supervisory board so that on the closing of the transaction the majority of the members of the Supervisory Board will comprise of independent non-executive members.
The new management added LeasePlan will maintain its strong focus on client and employee satisfaction.
“Current arrangements with the works councils and relevant trade unions will be maintained,” officials said. “The consortium has no plans to make material changes to locations where LeasePlan does business or conditions of employment of the workforce.”
With the expectation of the deal still closing during the third quarter, Cox Automotive announced late on Monday that it has voluntarily withdrawn its filing under the Hart-Scott-Rodino Antitrust Improvements Act as amended to complete its proposed acquisition of Dealertrack Technologies.
The company indicated that it made the decision in order to provide the U.S. Department of Justice with additional time to review acquisition details.
As previously announced on June 15, Cox Automotive and Dealertrack have signed a definitive merger agreement under which Cox Automotive will acquire Dealertrack in an all-cash transaction valued at $4 billion, or $63.25 per share, subject to certain conditions set forth in the agreement.
Officials explained a new waiting period under the HSR Act will begin when Cox Automotive resubmits its HSR filing, which is expected to occur on Wednesday.
“Cox Automotive and Dealertrack continue to work cooperatively with the U.S. Department of Justice staff in their review of the proposed transaction, and expect to close the transaction in the third quarter of 2015,” Cox Automotive said.
Cox Automotive president Sandy Schwartz had acknowledged in a recent interview that tasks ahead are going to create a busy time for company executives, managers and staff during the remainder of the year as they finalize the $4 billion acquisition of Dealertrack.
However, Schwartz emphasized the focal point for meeting agendas, project lists and other endeavors consistently will be about what will help dealers become more profitable.
“There are so many things we could do that are neat and make sense, but this is going to be all about prioritization,” Schwartz said.
Meanwhile, in another interview, Dealertrack co-president Raj Sundaram had emphasized the company’s commitment to its client base. According to the Dealertrack’s first-quarter financial report, 20,661 dealers use the company’s technology, as do another 1,557 finance companies.
“The message is this is an exciting opportunity from the standpoint of the benefits of this transaction are going to offer dealers and how we’re going to help dealers execute on their vision. The combined capability we’re going to bring is going to be tremendous for dealers to continue to thrive,” Sundaram said.
The financial underpinnings for the private equity firm investment in America’s Auto Auction and affiliated company, Auction Credit Enterprises, received a boost on Monday.
Babson Capital Management, a leading global asset management firm with more than $217 billion in assets under management, purchased equity interests to support Trinity Hunt Partners' acquisition of AAA and ACE.
Founded in 2005 and based in Dallas, AAA is a wholesale auction company offering a full spectrum of remarketing services for buyers and sellers of used vehicles. The company has 11 facilities.
ACE is a related finance company providing floor-plan financing to dealers who purchase vehicles at auction.
“Trinity Hunt is pleased to partner with Babson on our investments in AAA and ACE," said Daniel Dross, managing partner for Trinity Hunt Partners.
“We value Babson's relationship-oriented approach to investing as well as its core strength in fundamental investment analysis, and we look forward to working with Babson’s team on future opportunities,” Dross continued.
Michael Klofas, managing director and head of Babson’s mezzanine and private equity group, explained why the firm made this decision.
“Babson is excited to broaden our partnership with Trinity Hunt through our support of the AAA and ACE investment,” Klofas said.
“Trinity Hunt has a proven track record of working with management to help companies realize their growth potential, and we believe the prospects for AAA and ACE are very attractive given favorable industry trends and opportunities to grow organically,” Klofas went on to say.
Asbury Automotive Group announced Tuesday its expansion in the Florida market via its acquisition of Mike Davidson Ford in Jacksonville.
The dealership, which generates approximately $90 million in revenues annually, will be rebranded as Coggin Ford to join the Coggin Honda and Nissan that Asbury owns in the nearby vicinity.
The new addition brings Asbury's dealership tally in The Sunshine State to 24, along with three Q auto locations.
“We are very excited to add this Ford store to better serve our Jacksonville customers and are pleased to expand our suite of Coggin stores,” said David Hult, the executive vice president and chief operating officer of Asbury Automotive Group. “We welcome our new employees to the Asbury family and are looking forward to this opportunity in the Jacksonville area.”
For more information on Asbury, visit the automotive group’s website here.
It took just 35 days for J.D. Power to complete its acquisition of NADA Used Car Guide.
Officials highlighted on Wednesday the acquisition first announced on May 28 culminates an investment to bring together the advanced analytics of new- and used-vehicle retail sales and pricing data within the Power Information Network (PIN) from J.D. Power with the extensive knowledge, expertise and market presence of the NADA Used Car Guide.
“The acquisition of NADA Use Car Guide expands J.D. Power’s analytical and modeling capabilities, deepening its presence in auto finance and auto insurance, and enriching retail solutions,” said Douglas Peterson, president and chief executive officer of McGraw Hill Financial.
“J.D. Power’s impressive breadth of automotive benchmarking, and analytical and advisory services, ideally positions it to create unique market intelligence with unparalleled value by combining NADA used-car analytics with PIN's extensive new-car retail and pricing capabilities,” Peterson continued.
Now part of J.D. Power's automotive operations, NADA Used Car Guide will continue to serve its more than 100,000 subscribing clients, including retailers, financial institutions, insurers and software providers, under the day-to-day leadership of Mike Stanton, vice president and chief operating officer of the NADA Used Car Guide.
“NADA Used Car Guide, with its vehicle valuation capabilities and analytical solutions, is a perfect complement to PIN's expertise in new- and used- vehicle retail and pricing services,” said Finbarr O’Neill, president of J.D. Power.
“The guide’s high integrity and unbiased approach to used-vehicle values, analytics and insights fits perfectly with J.D. Power’s reputation as a trusted advisor to the automotive industry,” O’Neill added.
Furthermore, both J.D. Power and NADA UCG will continue to have a major presence during the series of industry-leading presentations, panel discussions and networking opportunities at Used Car Week, which is slated to run from Nov. 16 through Nov. 20 at the Phoenician in Scottsdale, Ariz.
J.D. Power’s Joe Derkos as well as Jonathan Banks and Larry Dixon of NADA UCG are on tap to return to Used Car Week, which includes the CPO Forum, the SubPrime Forum, the Re3 Conference and the National Remarketing Conference.
Auction Broadcasting Co. announced the purchase of its eighth auction facility on Friday. Broadening its presence in the Southeast that already includes auctions in Louisiana, Alabama and Kentucky, ABC Auto Auctions bought Tidewater Auto Auction in Virginia Beach, Va.
In a message to Auto Remarketing, ABC president Jason Hockett indicated the name of this new addition will be changed to ABC Virginia.
“Tidewater Auto Auction has been on our radar for a long time,” Hockett said. “My brother, Mike Hockett Jr., started Tidewater Auto Auction in October 1996. In 2011, Mike built a brand new 72 acre location in Virginia Beach with eight auction lanes.
“The auction is located in a great location to strategically facilitate vehicles for dealers as well as finance and leasing companies,” Jason Hockett continued.
ABC Virginia will host a dealer-only auction each Wednesday beginning at 10 a.m. as well as a public sale each Saturday starting at 10 a.m.
The company highlighted ABC Virginia will be managed by industry veteran Jason Brinkley.
“Jason Brinkley ran Tidewater Auto Auction from 1997 to 2001,” Jason Hockett said. “Brinkley also helped ABC with its greenfield start up locations in St. Louis and Lancaster, Pa.
“He and his family are excited with the opportunity of going home to Virginia,” Jason Hockett went on to say.
Mike Hockett Jr. expressed his reaction to the facility now becoming a part of the ABC Auction family.
“I brought the auction as far as I felt I could as an independent,” he said. “I knew that if the auction was to do better, it would need a name connected with a larger client base. ABC was a natural choice with an excellent management team.
"My father and brothers have built a formidable national auction group that I feel will push ABC Virginia to the potential it was built for,” Mike Hockett Jr. continued. “Having Jason Brinkley as a known entity to the dealer base is a fantastic choice. The dealers love him and the employees respect him. I could not be happier.”
Along with the facilities in St. Louis and Lancaster, Pa., Auction Broadcasting Co. also has operations in Baton Rouge, La., Birmingham, Ala., Bowling Green, Ky., Cincinnati and Detroit/Toledo Ohio.
In an effort to ramp up its business outside of North America, KAR Auction Services announced this week that its subsidiary ADESA (UK) Limited acquired HBC Vehicle Services.
Headquartered in Canvey Island, England, HBC specializes in salvage vehicle auctions and related services.
“This acquisition is the start of our expansion into new global markets, and we look forward to bringing our remarketing capabilities to the United Kingdom and beyond,” KAR chief executive officer and chairman Jim Hallett said.
“KAR is unique in that we are able to offer our customers an unmatched range of automotive remarketing services: from online and physical whole car and salvage auctions to floorplan financing and a wide range of used vehicle technology solutions such as Autoniq, TradeRev and DataScan,” Hallett continued.
HBC Vehicle Services provides efficient salvage collection and disposal services for some of the U.K.’s top insurance, fleet and accident management companies.
A leader in salvage auction technology, executives highlighted the company conducts business using a multitude of sales channels, including online auctions, and operates from 10 U.K. locations. With more than 50 years of experience, they pointed out HBC Vehicle Services has a significant buying audience throughout Europe.
“We are and will remain dedicated to our customers,” said Steve Hankins, managing director of HBC Vehicle Services.
“With KAR’s expertise and support, we are excited to accelerate our growth plans and continue to deliver competitive services to the salvage auction industry across the United Kingdom,” Hankins continued. “We look forward to finding new ways to deliver the best products and services to all of our customers.”
Hallett added, “We welcome the entire HBC team.
“HBC’s reputation for exceptional service makes them a natural fit with our organization, and we are very pleased to have them join the KAR group of companies,” Hallett went on to say.
ADESA (UK) Limited is a wholly owned subsidiary of KAR and is focused on bringing new products and services to the U.K. automotive marketplace with special emphasis on upstream remarketing services that emphasize efficiency and technology to support franchise and independent retailers.
Cox Automotive president Sandy Schwartz acknowledged tasks ahead are going to create a busy time for company executives, managers and staff during the remainder of the year as they finalize the $4 billion acquisition of Dealertrack Technologies, a development made public on Monday morning.
However, Schwartz emphasized the focal point for meeting agendas, project lists and other endeavors consistently will be about what will help dealers become more profitable.
“There are so many things we could do that are neat and make sense, but this is going to be all about prioritization,” Schwartz said during an exclusive phone conversation with Auto Remarketing on Monday only a couple of hours after the Dealertrack acquisition announcement was released.
“One of the things we’ve worked really hard at during the last year — but especially in the last three years or so since Autotrader and Manheim have been close together — when we prioritize, we look at it through the eyes of the dealer,” he continued. “We’re very dealer-centric, and OEM-centric, too, but really dealer-centric.
“When we look at the big tasks ahead of us, we know we can’t do everything. We know we wouldn’t do everything well if we tried, but what are the big game-changers? What would make the difference for a dealer? We want dealers to get products and use the ones that make them more efficient, that make them better, that help them in this new digital retailing landscape,” Schwartz went on to say.
“Yes, we’ll be very busy,” he added. “But I worry less about how many things there are to do and more about how we prioritize them so we’re not a jack of all trades and master of few and so we’re No. 1 at what we do. It is going to be guided more by the dealer than it is us. It’s going to be guided by how that dealer can use those products. We’ll look through their eyes.”
Cox and Dealertrack came eye-to-eye on their deal after more than a year of dialogue that gradually became more active, according to Schwartz. After being able “to strike the right deal,” Cox’s portfolio not only includes Manheim and Autotrader, but also major industry players such as Kelley Blue Book, vAuto, HomeNet Automotive and NextGear Capital as well as Dealertrack once the acquisition is completed as projected during the third quarter.
“I’ve been involved in deals for many years, but the great part of this one is these are two truly great complimentary companies,” Schwartz said. “Our services, our products, their services, their products, they really complement each other, so that’s one of the many reasons I’m so excited about this deal. It gives us a lot more solutions for dealers. We think of this as a real competitive marketplace, this will drive and help dealers in many ways.”
Schwartz chuckled when posed with the question about what other service providers might be left for Cox to bring into its portfolio. Like dealers who slug it out along “car row” in their respective communities, Schwartz explained how industry support companies such as Cox also are involved in an intense arena.
“This marketplace — and I’m not just saying it because it sounds like a PR thing — it is so competitive,” Schwartz said. “We come up against products from people who are established, and we come against people who are two guys in a garage developing something today. The barriers of entry are just so low. We are always looking at ways that we’re going to be able to have products and services that are going to help dealers be more competitive, help them be more efficient.
“And more importantly when we think about this digital retailing process, it’s a journey that changes every day,” he continued. “We’re always going to be on the lookout for how we can create more things. Sometimes creating makes sense. Sometimes acquiring makes sense. There’s nothing I have my eye on that I would say we have to have. But I will tell you it’s never going to stop.”
While Cox Automotive certainly possesses many of the products and services dealers might need to have a thriving operation, Schwartz stressed that he believes in dealer choice.
“When I give speeches, one of the things I talk about all the time is we don’t think we should have products that are so bundled together that a dealer is forced to take our products. That’s not what we believe in,” he said. “We believe that there should be a choice out there. A dealership should be able to decide which product they want to use, which one fits them best.
“There is no dealer that is the same,” Schwartz went on to say. “There are big mega-groups and even the big groups are different. There are public companies; there are private companies. Something that works for someone in Portland, Ore., might not work for someone in Omaha, Neb. We think it is very individualistic.”
