Dealertrack Technologies announced Tuesday afternoon that it has acquired ASR Pro, a company that provides Web-based electronic multipoint-inspection and fixed operations services for dealers.
Approximate total consideration for the purchase includes $12 million in cash and $2 million in Dealertrack shares — all of which would be subject to standard purchase price adjustments.
Dealertrack also said there is $3 million of contingent consideration, subject to attaining future performance targets. The company said it will discuss the financial impact of this deal in its August conference call to discuss second-quarter earnings.
Dealertrack doesn’t believe the deal will have any material impact on its 2014 guidance.
“The acquisition of ASR Pro will augment our existing integrated suite of fixed operations offerings. With the proper management and control of the service lane and shop, we feel that the opportunity for capturing additional service revenue for dealers is tremendous,” said Raj Sundaram, executive vice president of Dealer Solutions at Dealertrack. “The powerful combination of our dealer management system (DMS) and ASR Pro will help dealers transform their service business and benefit from the rapidly growing fixed operations marketplace.”
Fred Fordin, ASR Pro’s chief executive officer, said: “The joining of our organization with Dealertrack’s resources and expertise will help more dealers create a sustainable and profitable service and parts business, while significantly improving customer satisfaction and retention.
“We look forward to being part of Dealertrack and continuing to bring innovative solutions to the fixed operations market,” he added.
Private dealership groups accounted for more than 83 percent of the dealership acquisitions in the first quarter, but public groups may be showing signs of growth, albeit modest and with caution.
That’s according to The Kerrigan Quarterly Blue Sky Report released this week, which said overall buy/sell activity among U.S. dealerships shot up 60 percent in Q1.
There were 48 dealership acquisitions in the first quarter, up from 30 in the same period of 2013. Forty of those purchases were made by private dealer groups, the report said, but the recent move by Lithia Motors to buy DCH Auto Group may spur additional growth among its public peers.
That does, however, come with a bit of a caveat.
“Private companies continued to dominate the market in Q1, although public company activity rose slightly during the quarter and will likely continue to pick up after the announcement of Lithia’s acquisition of DCH,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors
“The publics, however, are being very disciplined with their capital allocation. If they believe the better investment is their own stock, they are choosing a stock buyback over an acquisition. In the first quarter, collectively, they chose to spend 70 percent more on their own stock than on U.S. acquisitions.”
More specifically, the public groups spent $96 million to buy dealerships in the U.S. during Q1, which was a 9-percent year-over-year increase, according to the report. However, compare that to the $163 million they spent on stock buybacks.
Not to mention, the report indicates that public dealerships allocated just 24 percent of their capital in Q1 to acquisitions (19 percent domestic, 5 percent international), compared to 40 percent in full-year 2013 (25 percent domestic, 15 percent international).
“This spending level is still lower than pre-recession levels,” the report said, referring to the $96 million spent on U.S. dealerships in Q1. “However, if Lithia’s acquisition of DCH closes in 2014, it would likely bring total US acquisition spending back to pre-recession levels for the year.”
The report later added: “Kerrigan Advisors continues to be surprised by the lower than expected acquisition activity by the publics, particularly given their record access to capital for acquisitions.
“We were pleased to see Lithia break the mold in June with the announcement of a $362.5M acquisition and hope this is an indication of a future increase in public acquisition activity.”
Internet Brands, an online media and software services organization that includes such automotive players as CarsDirect, Chrome Data and Autodata Solutions, announced earlier this week that it will be purchased by global investment firm KKR.
The two companies signed a definitive agreement in which KKR will purchase Internet Brands from Hellman & Friedman and JMI Equity.
The statement released Monday indicates that Internet Brands chief executive officer Bob Brisco and the company’s management team will hold a minority stake in the company and continue running its operations.
Brisco said, “We’re delighted to be partnering with KKR at this important juncture in our business, when we have dramatically expanded our client solutions portfolio and our growth in key areas is accelerating.”
Herald Chen, member of KKR and co-head of the firm’s technology investing team, added, “Internet Brands is at an exciting inflection point of growth as the company transitions from a portfolio of web assets to a vertically integrated provider of media and client software solutions.
“Its growth has been driven by its propriety operating platform and a management team with a focused vision. We look forward to partnering with the team and supporting the company in its next phase of growth.”
Tarim Wasim, managing director of Hellman & Friedman, said: “We have had a very successful partnership with Bob and the entire Internet Brands team. We are proud of the Company’s performance and transformation, and wish the team continued success under KKR’s ownership.”
For more information on Internet Brands, which also operates outside of the automotive space, visit www.internetbrands.com.
American Auto Auction Group announced today that it has been purchased by Huron Capital Partners, a Detroit-based private equity investor that aims to grow lower middle-market companies in partnership with management through customized buy-and-build strategies.
Serving as the new chief executive officer of AAAG will be Cam Hitchcock, who most recently served as executive chairman of Primeritus Financial Services and partner at Elysian Advisors. Meanwhile, Bill McIver will work in a consulting role as he transitions from his role as CEO to an active member of the board of directors.
Darris McClure, currently the AAAG president, will be president and chief operating officer. Bruce Reese will remain chief financial officer.
“I am honored and excited to partner with Huron, Darris McClure and the AAAG senior management team. Additionally, I’d like to thank Bill McIver for his key contributions to AAAG’s success and for his continued involvement with the company,” said Hitchcock.
“We have closely watched the dealer sale market segment over the last 24 months and believe that there are significant opportunities to better serve dealer consignors in many U.S. markets,” he continued. “Our objective is to provide AAAG’s customers with highly responsive, tailored service offerings across multiple geographies. Huron has committed significant capital to enhance and scale this platform, and we look forward to deploying it.”
Sharing a bit more about Hitchcock’s experience, it includes time with the boards of two private equity-backed auction remarketing companies. Previously, he was president and CEO at Dealer Services Group and was corporate CFO at ADESA, Inc.
Peter Mogk, senior partner at Huron, said: “Huron is very excited to partner with the AAAG family of auctions, their employees, and customers to continue building what we believe is the preeminent national auction group focused primarily on dealer-to-dealer sales.
“In the years to come, we intend to make a difference in the lives of people by investing in our team and the communities we serve. We know from experience that value-added customer service begins with equipping our people with the best facilities, training, and career opportunities,” he continued. “We believe we have ample resources dedicated to build, grow and acquire auctions that embrace technology and ever-changing customer needs.”
AAAG is an entrepreneurial, leading auction provider with sites in South Carolina, Florida, Mississippi, Texas, California and Wisconsin as well as private-label auctions across multiple markets.
An exclusive report from Reuters released Wednesday afternoon indicated that Gannett Co., one of the newspaper companies with a stake in the parent company of Cars.com, is interested in perhaps buying Cars.com.
Reuters — which cited “people familiar with the matter” — said in this report that Gannett is considering putting together a deal with private equity firms to purchase full ownership in Cars.com for as much as $3 billion.
Cars.com is owned by Classified Ventures, a strategic joint venture five media companies that includes Gannett, Belo, The McClatchy Co., Tribune and Graham Holdings.
When reached by Auto Remarketing, a spokesperson for Cars.com declined comment on Wednesday.
Dealers and dealer groups are making moves at a rapid pace, as research shows acquisition rates are on the way up.
According to an industry report released Monday, auto dealership buy-sell transactions rose by double-digit rates in 2013, and analysts are predicting this year’s rates will continue to rise.
The buy-sell market is reviewed in The Blue Sky Report from Haig Partners LCC, and the report shows public retailers committed more than $1 billion to acquisitions for the first time since 2006 last year.
And these stores are going for more, as the value of public dealerships’ acquisitions climbed 16.5 percent from 2012 levels, according to the report.
The number of private transactions rose 14 percent.
“Auto dealers are enjoying record profits, new vehicle sales are strong and rising, and the economy is improving. Those factors are driving valuations to all-time highs. It’s an ideal environment for sellers,” said Alan Haig, founder of Haig Partners. “But the sellers’ advantageous position isn’t deterring buyers. It’s a low-yield world with few attractive alternatives for investment capital. Even with high purchase prices, dealership acquisition returns are very compelling.”
New firm Haig Partners advises owners on selling their dealerships. Its founder, Alan Haig, led the automotive retail practice for the investment banking arm of The Presidio Group LLC, and was head of AutoNation’s corporate development group.
Haig explained the buy-sell market will remain “robust” for a variety of reasons.
The report states private buyers are very active and interested in both single-point stores and larger groups.
Haig also shared that most all of the public retailers have expressed “a desire to grow through meaningful acquisitions.”
“Many dealership groups have the capacity to make commitments of $100 million or more, with several capable of $500 million deals,” according to the report.
The range of brands is growing, as well.
According to the report, the 10 largest dealer groups acquired 16 different franchises in 2013.
"For sellers, dealership values appear to be at an all-time high. Plus, almost every franchise is in demand today. More dealers are taking this opportunity to sell their business for values that were not conceivable just a few years ago. And the market is ripe for the sale of large dealership groups," the report stated. "We remain in a 'win-win' period for dealership sales: strong returns for buyers and strong pricing for sellers."
Editor's Note: For from from the year-end Blue Sky Report, see Wednesday's Auto Remarketing Today.
ADP announced this morning that it plans on spinning off its Dealer Services business.
The company said in a statement that its board of directors approved a proposal to separate the Dealer Services unit into an independent publicly traded company; this will be done via a tax-free spinoff of the entirety of Dealer Services to ADP shareholders, ADP explained.
“Consistent with our strategy to grow our position as a global provider of HCM solutions, we have concluded that the separation of Dealer Services will allow both companies to focus on their respective industries,” said Carlos Rodriguez, ADP’s president and chief executive officer.
“The Dealer Services business remains attractive in terms of long-term growth opportunities; however, we believe this transaction will benefit ADP's shareholders by allowing each management team to better focus on its own business and strategic opportunities. ADP’s ongoing efforts and commitment will be focused on executing against our global HCM strategy,” he continued. “As we deliver against this commitment, our goal remains driving consistent and sustainable profitable revenue growth and return of capital to shareholders through dividends and share repurchases."
Current Dealer Services president Steve Anenen will be CEO of the new standalone company, and current chief financial officer Al Nietzel will remain in that role for the new entity.
Officials expect the spinoff to be completed early in the fourth quarter, once all required regulatory reviews and approvals are done.
With the spinoff, ADP anticipates receiving at least $700 million “in a tax-free manner,” and then returning the proceeds to shareholders via share repurchases once the spinoff is completed, “depending on market conditions,” the company indicated.
In an emailed statement this morning, Donna Combs — who is the vice president of marketing at ADP Dealer Services — said: “Rest assured, this is a positive announcement. Dealer Services, for all practical purposes, has operated as a standalone organization under the ADP umbrella for many years. This change will allow us to more sharply focus on our strategies and priorities, which are based on meeting our clients’ unique needs.
“Post-spin, we will be a global $2 billion company (Fortune 1000) serving over 26,000 clients in more than 100 countries with scale and resources to meet market needs. Our clients will benefit from us being an independent, more sharply focused organization. We intend for this transaction to be seamless to our clients, other than a name change,” she continued. “I am sure you all have many questions, but note that no one at ADP or Dealer Services can comment further on this until the transaction is complete.”
As part of an ongoing strategy to reach company milestones, Lithia Motors this week announced yet another store acquisition, along with the opening of a new Chrysler franchise.
Acquisitions will push the company toward achieving its goals in the next few years, more so than organic growth, said company president and chief executive officer Bryan DeBoer in an Auto Remarketing report this winter that recapped the company’s fourth-quarter and full-year 2013 performance.
"The acquisition market is as active as I have ever seen, and there are a number of acquisitions in play at any given week or month," he said in late February. "We continue to look for domestic and import franchises in mid-size rural markets and exclusive luxury franchises in metropolitan markets."
Announced this week is the acquisition by Lithia of Access Ford in Corpus Christi, Texas. The company also noted the opening of Lithia Chrysler Jeep Dodge of Wasilla in Wasilla, Alaska.
The two stores will add an estimated $105 million in annual revenues, officials said.
"We are pleased to be growing with Ford in the Corpus Christi community, which adds to our existing store in the market," DeBoer said. "We also received a new franchise from Chrysler to open a store in Wasilla, which complements our existing stores in Wasilla and Anchorage. Both of these stores fit our strategy of seeking exclusive franchises in regional markets."
Lithia made seven store acquisitions during 2013 and has kept that momentum rolling into 2014.
"We remain focused on achieving the three milestones for long-term growth that we laid out in 2012, which doubles our size in three to nine years," DeBoer said in February.
"I am pleased to announce that we achieved our first milestone by surpassing $4 in consolidated earnings per share this year,” he added, referring to 2013. "We anticipate to achieve our second milestone of approximately $5 per share, and our third milestone or approximately $6 per share, over the next several years."
Ally Financial announced this morning that it has begun an initial public offering of shares of its common stock.
In its statement, Ally said the shares offered in the IPO will be from the U.S. Department of the Treasury, per Treasury’s planned exit of its investment in the company.
The 95 million shares being offered by Treasury are priced between $25 and $28. Treasury has also given the underwriters a 30-day option to buy up to an additional 14.25 million share to cover any over-allotments.
It is expected Ally’s stock will trade on the New York Stock Exchange with the symbol “ALLY.”
Statement from January
The latest movement follows news in January, when Ally issued the following statement from chief exectuive officer Michael Carpenter regarding the the U.S. Treasury's sale of its common stock.
“The U.S. Treasury has completed a private placement of approximately $3 billion in Ally common stock and, including this transaction, the U.S. taxpayer has received approximately 89 percent of the investment made in Ally,” Carpenter said in the statement released Jan. 12. “This is a very positive outcome for Ally and for the U.S. taxpayer, and the strong investor interest is a testament to the significant transformation of the company.
“In the fourth quarter of 2013, Ally completed a series of strategic actions, including: raising common equity, achieving a non-objection to our CCAR plan, gaining approval for the ResCap Chapter 11 Plan, returning $5.9 billion to the U.S. Treasury, reaching a settlement with the CFPB and the Department of Justice, and being granted Financial Holding Company status. These actions, coupled with the strength of our ongoing business, position Ally to complete its plans to exit TARP and to continue to build upon our thriving franchises.”
DCH Auto Group announced today it has added another California dealership to its lineup.
With the acquisition of Honda of Mission Valley in San Diego, the dealership group expands its store count to 27 existing new and pre-owned car dealerships in New Jersey, New York and California.
The store, which will be renamed DCH Honda of Mission Valley is the 14th store for the group in the Sunshine State.
"DCH Honda of Mission Valley is a wonderful addition to the DCH family of dealerships," said Shau-wai Lam, chairman of DCH Auto Group. "We are very excited to become a part of the Mission Valley community."
The dealership will offer the full line of Honda vehicles, and is located at 5812 Mission Gorge Road in San Diego.
The company also shared that the store will be a “focal point” for the larger San Diego area as DCH brings it Teen Safe Driving Program to the Mission Valley community.
“DCH Auto Group is committed to reducing the number of car crashes involving teen and young drivers – car crashes are the number one killer of teens in the United States,” company officials shared. “Through the efforts of DCH team members and the company's partnerships with local high schools and community organizations, DCH works to educate teens and their parents about the dangers of distracted driving and the importance of the Graduated Driver's License, among other safe driving topics.”
