Group 1 to Acquire UAB Motors - Analyst Blog

By Zacks | January 29, 2013 AAA

Group 1 Automotive Inc. (GPI) announced that it has entered into an agreement to purchase Brazil's largest automotive retailers UAB Motors Participacoes S.A. This acquisition is a part of the company's strategy to expand in the fast-growing Brazilian market.

For the acquisition, Group 1 will pay around $47.4 million in cash and 1.45 million shares of Group 1 common stock. It will also assume nearly $62.0 million of UAB's net non-floorplan debt due to the acquisition.

UAB Motors has 18 dealerships with 21 franchises, and 5 collision centers in Sao Paulo metro market and the key metropolitan markets in the adjacent state of Parana. It will complement the Group 1's existing brands of Toyota Motor Corporation (TM) with 2 dealerships, Nissan Motor Co. Ltd. (NSANY) with 4 dealerships, BMW with 4 dealerships and BMW/MINI with 2 dealerships. It will also add four new brands - Renault (3 dealerships), Peugeot (3 dealerships), Land Rover (1 dealership) and Jaguar (1 dealership) to Group 1's portfolio.

The acquired dealerships are expected to generate $650.0 million in estimated annual revenues and will boost earnings per share by 3 cents to 5 cents in 2013. However, the acquisition will lead to $1.5 million in pre-tax deal costs in the fourth quarter of 2012. The deal is expected to close on Feb 28.

Houston, Texas-based Group 1 Automotive is one of the largest automotive retailers in the U.S., which sells new and used cars and light trucks; arranges vehicle financing, service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts.

In the third quarter of 2012, the company posted an impressive 30.7% increase in earnings per share to $1.32 from $1.01 in the prior-year quarter. Earnings per share exceeded the Zacks Consensus Estimate by a penny.

Revenues for the quarter went up 25.9% to $2.0 billion from the year-ago quarter. The growth in revenues was driven by strong retail new vehicle and used vehicle unit sales. The company now has a Zacks Rank #2 (Buy).

Lithia Motors Inc. (LAD), with a Zacks Rank #1 (Strong Buy), is performing well in the same industry where Group 1 operates.

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