Lithia Motors Inc. is now the owner of southeast Michigan’s Suburban Collection and 34 of its dealerships in a deal expected to add $2.4 billion in annual revenue.
The sale, first reported in January and which closed Monday, is one of the largest-ever acquisitions for Lithia as well as one of the largest auto-retail transactions of the past decade.
Specific terms of the acquisition were not disclosed.
But Lithia CEO Bryan DeBoer, in an interview, said the price Lithia has paid for recent acquisitions has been equal to 15 to 25 percent of a dealership group’s annual revenue, and that the Suburban deal fell in the middle of that range. That would make the value of the deal about $500 million. He said the company’s net investment includes retail operations, goodwill, some inventory and real estate.
Lithia, the nation’s third-largest new-vehicle retailer in 2020, has now acquired dealerships with annualized revenue of about $6.5 billion since its July announcement of plans to generate $50 billion in revenue and earnings per share of $50 annually by 2025.
The Suburban deal gives the Medford, Ore., company a national store count of 246. AutoNation Inc., the largest U.S. dealership group in terms of 2020 new-vehicle sales, owned and operated 235 stores at the end of 2020, including used-only AutoNation USA stores.
A definitive agreement between the two groups was signed in late January, DeBoer said. He told Automotive News that official talks between Lithia and Suburban began in November 2020.
“It’s a high-performing organization that establishes our first anchor in [the Midwest] and allows us to be able to springboard to other platforms in that area,” DeBoer said. “We still are looking for partners all across the country.”
Suburban CEO David Fischer Jr. will stay on to run the Michigan dealerships and become a Lithia vice president, according to a statement.
“I am honored to continue to lead the Suburban Collection team, backed by the enhanced technology, selection and financing options Lithia brings with its ownership,” Fischer said in a statement.
Fischer’s ongoing role will be an advantage for Lithia, according to George Karolis, president of the Presidio Group, a buy-sell advisory firm in San Francisco and Atlanta, which represented the Suburban Collection in the transaction — the third time it represented sellers to Lithia over the past eight months.
“This is a plug-and-play transaction for Lithia,” Karolis said. “It’s hard to build a group of that size and scale from scratch in any new market.”
The deals that closed before the Suburban acquisition represented about $4 billion in combined annualized revenue for the company. Lithia was not represented by a broker in the Suburban deal.
The Suburban Collection acquisition is at least Lithia’s biggest since the 2014 purchase of the DCH Auto Group, which had 27 stores and $2.3 billion in revenue.
Lithia acquired 34 Suburban dealerships representing 33 brands. In total, the deal covers 56 franchises in Michigan and excludes Suburban Collection’s Buick-GMC and Cadillac stores in Costa Mesa, Calif.
Suburban Collection of Troy, Mich., ranked 21st in the nation for new-vehicle sales in 2020, according to the Automotive News Research & Data Center. The group sold 29,314 new vehicles last year. Founded by the Fischer family in 1948, the Suburban Collection said it sells 1 out of every 10 vehicles purchased in southeastern Michigan.
