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AutoNation to get 9 luxury stores in Priority 1 deal

The pending acquisition of Priority 1 Automotive Group in Maryland would add $420 million in annual revenue.

AutoNation Inc.'s plan to buy Priority 1 Automotive Group, of Towson, Md., will add nine luxury dealerships to the nation's largest new-vehicle retailer in a market where it already has a foothold.

Priority 1, a family-owned group in the Baltimore and Washington, D.C., areas, operates three BMW dealerships, plus Mini, Audi, Porsche, Cadillac, Acura and Jaguar-Land Rover stores and three collision centers. All of those businesses are expected to be part of the sale to AutoNation.

AutoNation said Thursday, as it announced record third-quarter results, that it has signed an agreement and aims to close on the acquisition in the fourth quarter, pending automaker and other approvals. The deal is expected to add about $420 million in annual revenue for AutoNation.

The Priority 1 acquisition follows AutoNation's purchase of another sizable dealership group after being on the sidelines of the buy-sell market since 2018.

In late September, AutoNation purchased 11 dealerships and a collision center from Peacock Automotive Group in a deal originally announced in April. Those stores are expected to generate $380 million in annual revenue.

"We will continue to look for additional acquisitions that complement our portfolio and meet our return thresholds," AutoNation CFO Joe Lower told analysts in a call Thursday.

Priority 1 President Lou Cohen, 80, told Automotive News that he thought two of his children, son Marc Cohen and daughter Alison Cohen, "would operate the business forever. But my phone rang last winter, and they came up with this idea that maybe it's a good time to sell. So that's what we explored."

Lou Cohen said the family hired sell-side firm Kerrigan Advisors, of Irvine, Calif., to market the stores. He said AutoNation was a likely buyer for his group, as "they had a platform not far from us that we had tried to buy a few years ago and got in a bidding war with them."

Cohen said the parties signed an agreement in late July. A closing is slated for Nov. 8. The Cohens are retaining a leasing company.

Erin Kerrigan, managing director of Kerrigan Advisors, said the Cohens also faced some significant real estate projects for facility upgrades, which factored into the family's decision to divest.

"This transaction really speaks to public companies seeking to round out their dominance in markets they're already in," Kerrigan said.

AutoNation so far this year has closed on and announced acquisitions that combined will add about $800 million in annual revenue.

But unlike some of its public dealership group competitors that have announced or closed on megadeal acquisitions this year, AutoNation is deploying its resources in various ways, including expanding its platform of AutoNation USA used vehicle-only stores and aggressively buying back shares of AutoNation stock.

From Sept. 30, 2020, to Sept. 30, 2021, AutoNation spent $2.2 billion to buy back 27 percent of its outstanding shares of stock, and the company said its board of directors has authorized spending another $1.3 billion on stock repurchases.

AutoNation CEO Mike Jackson has largely favored stock repurchases over paying what he has described as high prices for dealerships. But he and Lower on Thursday said AutoNation will continue to search for the right acquisitions.

"Where there are attractive opportunities for M&A, we will pursue them," Lower said.

AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 249,654 new vehicles in 2020.

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