Pohlad Cos. is exiting the auto dealership business, selling its Carousel Motors Group that sells luxury cars such as Audi, BMW, Porsche and Ferrari models.
The deal comes during a period of consolidation in a fragmented industry as dealerships are being sold to large consolidators in the industry.
Lithia Motors, one of the largest auto dealership businesses in the United States and one of the consolidators, is buying Carousel.
Carousel Motors contains nine dealerships in all — eight in the Twin Cities and one Hudson, Wis. Terms of the deal with Lithia, based in Medford, Ore., were not disclosed, but the sale is expected to close in the next six to eight weeks.
"Over the last 15 years, Carousel Motor Group has built a strong network of dealerships and served thousands of customers in our community, thanks in large part to its team of talented and committed employees," said Tom Pohlad, executive chair of Pohlad Cos., in a statement. "Carousel Motor Group's reputation for excellence and success in our market has poised them for growth. We are confident Lithia Motors Inc. is the right partner to take them to the next level."
The Pohlad Companies declined to offer more details on the sale.
The Pohlads entered the auto dealership industry in 2008 when it purchased BMW of Minnetonka. Since then, the group added Audi and Porsche dealerships in St. Paul and Minneapolis and in 2021 opened a Ferrari dealership in Golden Valley. Carousel Motors also includes a Chevrolet dealership in North Branch, Coon Rapids Chrysler Dodge Jeep Ram and a Ford dealership in Hudson.
Lithia Motors owns 290 dealerships in the United States as well as 40 in the United Kingdom and 14 in Canada. Lithia will report its fourth quarter results on Feb. 14. Analysts who cover the company expect Lithia to report annual revenue of $31 billion, which would be an 11% increase in annual sales from 2022.
Daniel Imbro, an automotive analyst who covers Lithia Motors for Stephens Inc., said the company is seen as an acquirer of choice in the industry and has made similar acquisitions for a decade. He said in a research note that Lithia should add $500 million to $750 million in annual revenue from the Carousel deal.
Lithia Motors and Michigan-based Penske Automotive Group are the two largest auto dealers by revenue, and both were busy in 2023 acquiring dealerships. Lithia and Penske, based in Michigan, both made eight acquisitions of dealership groups during the year. Houston-based Group 1 Automotive, another large auto retailer, made two acquisitions in 2023 and five in 2022.
"We are encouraged to see Lithia continuing domestic M&A after faster international growth in (the second half of 2023)," Imbro wrote in research note.
According to Imbro consolidation in the industry is driven by a need to increase capital spending to accommodate more electric vehicles coming to the market and for more e-commerce initiatives. The increased spending also has put pressure on dealership profitability.
"We expect further consolidation in the coming years due to these factors," he said.
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January 26, 2024 at 12:13AM
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