Group 1 Automotive Inc 8-K, filed Sep 13, 2021
Group 1 Automotive Inc (GPI)
About this 8-K
Group 1 Automotive Inc filed this 8-K on September 13, 2021, reporting on events of September 12, 2021.
Items reported
- Item 1.01: Entered into a material agreement
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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| Item 1.01 | Entry into a Material Definitive Agreement. |
Purchase Agreement
On September 12, 2021, Group 1 Automotive, Inc., a Delaware corporation (the “Company”), entered into a Purchase Agreement (the “Purchase Agreement”) with GPB Portfolio Automotive, LLC, a Delaware limited liability company, Capstone Automotive Group, LLC, a Delaware limited liability company, Capstone Automotive Group II, LLC, a Delaware limited liability company, Automile Parent Holdings, LLC, a Delaware limited liability company, and Automile TY Holdings, LLC, a Delaware limited liability company (each, a “Seller” and collectively, the “Sellers”), and Prime Real Estate Holdings, LLC, a Delaware limited liability company (the “Real Estate Equity Seller” and, together with the Sellers, the “Seller Parties” and, together with their respective subsidiaries, the “Selling Entities”). The Selling Entities, collectively, are engaged in the operation of 30 dealerships and 3 collision centers located in the Mid-Atlantic and New England markets relating to (i) the sale and distribution of automobiles and other related equipment, components, spare parts and accessories, (ii) repair and maintenance services provided with respect to automobiles and related activities, (iii) owning and leasing real estate to dealerships and (iv) owning and operating collision centers (collectively, the “Business”).
Pursuant to the Purchase Agreement, the Company will acquire substantially all of the assets or equity of the Selling Entities, including, but not limited to, the Selling Entities’ real property, vehicles, parts and accessories, goodwill, permits, intellectual property and substantially all contracts that relate to the Business (collectively, the “Transaction”). The Company expects to pay a purchase price of approximately $880 million, subject to customary adjustments described in the Purchase Agreement (the “Purchase Price”) and appropriate reduction for any exercise of customary manufacturer rights of first refusal. At the closing of the Transaction, $45 million of the Purchase Price will be deposited into escrow as a contingent reserve to be used, if necessary, to compensate the Company for any post-closing indemnifiable losses pursuant to the terms of the Purchase Agreement, with 50% to be released to the Selling Entities 12 months after the closing of the Transaction and the remainder to be released to the Selling Entities 24 months after the closing of the Transaction, subject to pending claims, if any. The Purchase Price would be financed through a combination of cash, available lines of credit and debt financing.
The Purchase Agreement contains customary representations and warranties made by each of the parties, and the Company and the Seller Parties have agreed to indemnify one another against certain damages, subject to certain exceptions and limitations. The closing of the Transaction is subject to various closing conditions, including a receipt of approval or expiration of the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the approval of a court-appointed monitor over an affiliate of the Sellers. The closing of the Transaction is not conditioned upon the Company’s ability to obtain financing. The Purchase Agreement also contains certain termination rights of the Company and the Sellers.
The Transaction will close no later than the 75th day after the date of the Purchase Agreement, provided that the closing conditions are satisfied or waived.
Debt Financing Commitment Letter
In connection with entering into the Purchase Agreement, the Company entered into a commitment letter, dated September 12, 2021 (the “Commitment Letter”), with Wells Fargo Bank, National Association (“Wells Fargo”), pursuant to which, among other things, Wells Fargo has committed to provide a portion of the debt financing for the Transaction, consisting of a $250 million unsecured bridge loan (the “Bridge Facility”), on the terms and subject to the conditions set forth in the Commitment Letter. The Bridge Facility is subject to mandatory prepayment at 100% of the outstanding principal amount thereof with the net proceeds from the issuance of any debt securities of the Company and upon other specified events. The obligation of Wells Fargo to provide this debt financing is subject to a number of customary conditions, including, without limitation, execution and delivery of certain definitive documentation.
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The foregoing descriptions of the Purchase Agreement and the Commitment Letter are a summary, which are qualified in their entirety by reference to the Purchase Agreement and the Commitment Letter, copies of which will be filed with the Company’s next Quarterly Report on Form 10-Q.
| Item 7.01 | Regulation FD Disclosure. |
On September 13, 2021, the Company issued a press release announcing the Transaction, a copy of which is furnished herewith as Exhibit 99.1 and incorporated herein by reference.
The information contained in this Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to such filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibits are furnished as part of this report.
| Exhibit Number |
Description | |
| 99.1 | Press Release of Group 1 Automotive, Inc., dated September 13, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GROUP 1 AUTOMOTIVE, INC. | ||||||
| Date: September 13, 2021 | By: | /s/ Darryl M. Burman | ||||
| Name: | Darryl M. Burman | |||||
| Title: | Sr. Vice President | |||||
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Exhibit 99.1
FOR IMMEDIATE RELEASE
Group 1 Automotive Announces Acquisition of Prime Automotive Group Dealerships
| • | 30 Dealership Locations and 3 Collision Centers in the Northeast |
HOUSTON, September 13, 2021 - Group 1 Automotive, Inc. (NYSE: GPI), (“Group 1” or the “Company” or the “Buyer”), an international, Fortune 500 automotive retailer with 188 dealerships located in the U.S., U.K., and Brazil, today announced it has entered into a definitive agreement to purchase substantially all the assets, including real estate, of Prime Automotive Group (the “Seller”), headquartered in Westwood, Massachusetts. In 2020, the corresponding Prime dealerships generated $1.8 billion in annual revenues and retailed over 52,000 new and used vehicles.
“Group 1 has successfully operated in the Northeastern U.S. for many years. We are pleased to have this opportunity to leverage our existing cost structure and to further diversify our U.S. footprint,” said Earl J. Hesterberg, Group 1’s President and Chief Executive Officer.
With 30 dealership locations and three collision centers in the Mid-Atlantic and New England markets, Prime’s brand portfolio includes Acura, Airstream, Audi, BMW, Buick, Chrysler, Dodge, Ford, GMC, Honda, Jeep, Land Rover, Mazda, Mercedes-Benz, MINI, Porsche, RAM, Subaru, Toyota, Volkswagen, and Volvo. Once the acquisition is completed, Group 1’s consolidated brand mix is expected to be approximately 43% luxury, 36% non-luxury import, and 21% non-luxury domestic.
“We know Prime’s markets well and the opportunities they represent. We are also proud to welcome Prime Automotive’s 1,800 employees as new teammates to the Group 1 family. The addition of Prime Automotive enables us to extend our reach of AcceleRide®, Group 1’s industry leading digital retailing process, to even more customers,” said Daryl Kenningham, President of U.S. and Brazilian Operations for Group 1 Automotive.
Group 1’s Senior Vice President and Chief Financial Officer Daniel McHenry added, “While this transaction provides a transformation in scale for our company, our U.S. credit facility pro-forma leverage ratio will be approximately 2.0x after taking into account the financing of this transaction with debt and cash on hand, and liquidity remains comfortably within our targets. This gives us the flexibility to continue shareholder-focused capital allocation, which includes accretive acquisitions, share repurchases, dividends, and return-driven capital expenditures.”
Year to date 2021, Group 1 has completed $420 million of acquired revenues, and with this proposed acquisition, total acquired revenues are expected to be at least $2.25 billion at the anticipated closing date in late November. With the addition of the Prime dealerships, Group 1’s total U.S. dealership count would increase to 147, which includes 46 locations in the Northeast, and 218 locations globally.
Lazard acted as financial advisor and Vinson & Elkins L.L.P. acted as legal advisor to Group 1 Automotive, Inc. Jefferies LLC acted as financial advisor and Skadden, Arps, Slate, Meagher and Flom LLP acted as legal advisor to Highline Management Inc.
For additional information about this transaction, please see the Form 8-K that will be filed in connection with this transaction.
ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 188 automotive dealerships, 242 franchises, and 48 collision centers in the United States, the United Kingdom and Brazil that offer 32 brands of automobiles. Through its dealerships, the Company sells new and used cars and light trucks; arranges related vehicle financing; sells service contracts; provides automotive maintenance and repair services; and sells vehicle parts.
Investors please visit www.group1corp.com, www.group1auto.com, www.group1collision.com, www.acceleride.com, www.facebook.com/group1auto, and www.twitter.com/group1auto, where Group 1 discloses additional information about the Company, its business, and its results of operations.
FORWARD-LOOKING STATEMENTS
To the extent that statements in this press release are not recitations of historical fact, such statements constitute “forward-looking statements” as such term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this press release may include statements relating to goals, plans and expectations regarding the expected benefits of the proposed transaction, management plans, objectives for future operations, scale and performance, integration plans and expected synergies therefrom, the timing of completion of the proposed transaction, our financial position, results of operations, market position, business strategy and expectations of our management with respect to, among other things: changes in general economic and business conditions, including the impact of COVID-19 on the automotive industry in general, the automotive retail industry in particular and our customers, suppliers, vendors and business partners; our relationships with vehicle manufacturers; operating cash flows and availability of capital; capital expenditures; the amount of our indebtedness; the completion of pending and future acquisitions and divestitures; future return targets; general economic trends, including consumer confidence levels, interest rates and fuel prices; and automotive retail industry trends.
The following are some but not all of the factors that could cause actual results or events to differ materially from those anticipated, including: the occurrence of any event, change or other circumstances that could give rise to the termination of the purchase agreement; the risk that the necessary regulatory or third-party approvals may not be obtained or may be obtained subject to conditions that are not anticipated; the risk that the proposed transaction will not be consummated in a timely manner; risks that any of the closing conditions to the proposed acquisition may not be satisfied or may not be satisfied in a timely manner; risks related to disruption of management time from ongoing business operations due to the proposed acquisition; failure to realize the benefits expected from the proposed acquisition; failure to promptly and effectively integrate the acquisition; the effect of the announcement of the proposed acquisition on their operating results and businesses and on the ability of Group 1 and Prime Automotive Group to retain and hire key personnel, maintain relationships with suppliers; our ability to execute our business strategy; the annual rate of new vehicle sales in the U.S.; our ability to generate sufficient cash flows; our ability to improve our liquidity position; market factors and the future economic environment, including consumer confidence, interest rates, the price of oil and gasoline, the level of manufacturer incentives and the availability of consumer credit; the reputation and financial condition of vehicle manufacturers whose brands we represent and our relationships with such manufacturers, and their ability to design, manufacture, deliver and market their vehicles successfully; significant disruptions in the production and delivery of vehicles and parts for any reason, including natural disasters, affecting the manufacturers whose brand we sell; our ability to enter into, maintain or renew our framework and dealership agreements on favorable terms; the inability of our dealership operations to perform at expected levels or achieve expected return targets; our ability to successfully integrate recent and future acquisitions; changes in, failure or inability to comply with, laws and regulations governing the operation of automobile franchises, accounting standards, the environment and taxation requirements; our ability to leverage gains from our dealership portfolio; high levels of competition in the automotive retailing industry which may create pricing pressures on the products and services we offer; our ability to execute our capital expenditure plans; our ability to comply with our debt or lease covenants and obtain waivers for the covenants as necessary; and any negative outcome from any future litigation. These risks, uncertainties and other factors are disclosed in Group 1’s Annual Report on Form 10-K, subsequent quarterly reports on Form 10-Q and other periodic and current reports filed with the Securities and Exchange Commission from time to time.
These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, whether as a result of new information, future events or otherwise.
SOURCE: Group 1 Automotive, Inc.
Investor contacts:
Sheila Roth
Manager, Investor Relations
Group 1 Automotive, Inc.
713-647-5741 | sroth@group1auto.com
Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | cwoods@piercom.com