Group 1 On the Lookout for More Acquisitions, Hesterberg Says
Group 1 Automotive Inc. will snap up more dealerships in 2012, CEO Earl Hesterberg said, but he doesn’t expect the retailer to make more acquisitions than it did in 2011.
Last year, Group 1 added 14 franchises with total estimated annual revenues of $563 million.
“We clearly have the financial ability to” exceed 2011’s numbers, Hesterberg told Automotive News today after Group 1, the nation’s fourth-largest dealership group, reported record fourth-quarter profits. “But unless the attractive deals appear, I wouldn’t predict that at this time. But we would if we could.”
So far in 2012, Group 1 has acquired Volkswagen and BMW franchises with total estimated annual revenues of $93.4 million.
Group 1’s preferred strategy is acquiring a bigger group instead of one or two stores at a time, Hesterberg said.
“The more scale you get in a given market, which is usually what you get in a larger acquisition, is better for us,” he said. “We’re completely open to larger acquisitions.”
That said, a bigger purchase is not very likely in the current market, Hesterberg said. Group 1 is in continual discussions for smaller one- or two-store deals, he said, but there are no active discussions on a big acquisition.
Group 1 also won’t restrict acquisitions based solely on geography or brands, Hesterberg said. While his first preference is to strengthen the company in its current markets, he’ll consider entering new markets if the potential payback meets the company’s target of a 15 percent pretax return on investment.
“We’re more open on the brand mix of the acquisitions than we’ve ever been since I’ve been at Group 1,” Hesterberg said.
And while he’s not “100 percent convinced yet” of Chrysler Group, its robust performance last year is attention-getting.
“It hasn’t made it to the top of the list yet,” said Hesterberg. “But never say never.”
Earlier today, Group 1 reported fourth-quarter 2011 earnings of $20.8 million, or 90 cents a share, compared with earnings of $10.6 million, or 45 cents, during the same quarter last year. Revenue increased 13 percent to $1.63 billion.
For all of 2011, Group 1 said it posted earnings of $82.4 million, or $3.47 a share, compared with earnings of $50.3 million, or $2.09, in 2010. Revenues increased 10.4 percent to $6.1 billion.
Group 1 ranks No. 4 on the Automotive News list of the top 125 U.S. dealership groups with new-vehicle sales of 97,511 in 2010.
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