Lithia Motors Inc., fresh off its first dealership acquisition of 2022, is making clear that it remains on the hunt for additional stores and intends to keep up a rapid deal pace this year.
Lithia CEO Bryan DeBoer last week said the dealership group will continue to expand its geographic reach through store purchases in 2022. The retailer on Jan. 30 bought three dealerships in Northern California that are expected to add $700 million to its annual revenue.
“Looking forward, we have $1.1 billion in annualized revenue under contract” or subject to a letter of intent, DeBoer said after Lithia reported higher net income and record revenue for the fourth quarter. “In addition, our active deal pipeline has grown to over $13 billion. We remain confident in our ability to find deals that build out our physical network and that are priced at 15 to 30 percent of revenues, or three to seven times EBITDA.”
DeBoer added that sticking to that pricing discipline will ensure Lithia meets its after-tax return threshold of 15 percent “in a post-pandemic profit environment.”
Tom Dobry, Lithia’s vice president of marketing, said the acquisitions under contract are mostly in the two parts of the U.S. where Lithia’s footprint is the lightest: what it refers to as its North Central Region Three, which covers most of the Midwest, and its Southeast Region Six, which spans a section of the Sunbelt, including Florida.
“That doesn’t mean we won’t do things in other areas,” Dobry told Automotive News. “But we’re focused on building up the areas that we have less density in.”
Dobry declined to say when the deals under contract will close.
For all of 2022, Lithia is targeting the acquisition of $2 billion to $4 billion in annualized revenue, according to a Lithia investor presentation released last week. Dobry said the deals in process representing $1.1 billion in annualized revenue put Lithia on a good start to hit its target range.
DeBoer noted that Lithia has purchased dealerships expected to generate $1.4 billion in annualized revenue since Sept. 30, “adding critical density to the North Central Region Three and the Southeast Region Six.”
In November, Lithia bought two Audi stores in South Florida, a Ford dealership in Florida and two Ford dealerships in Michigan.
Lithia CFO Tina Miller said last week that the retailer ended 2021 with $1.5 billion in cash and available credit, which “if deployed today would support network growth of up to $6 billion in annualized revenues.”
