Miller Automotive Sold to Fortune 500 Firm By SHELLY GARCIA Senior Reporter Miller Automotive Group, a $400-million dealership with six Los Angeles locations, has been sold to Group 1 Automotive Inc., a Fortune 500 car retailer based in Houston. The acquisition marks the first entry by Group 1 into the Southern California marketplace. Miller operates Honda, Nissan, Infiniti and Mitsubishi dealerships in Van Nuys and Toyota and Honda dealerships in Culver City. In addition, the company has recently completed the purchase of a parcel on Ventura Boulevard in Woodland Hills which Group 1 will use to set up another Nissan dealership. “We have wanted to be in California since we went public,” said Ben Hollingsworth, chairman, president and CEO of Group 1. “And we’ve known the Millers for some time and have never been able to put it together. We were just patient.” The purchase price for the dealership was not disclosed. However, in announcing the acquisition, Group 1 said it paid $85 million in cash for Miller and four other individual dealerships in Tulsa and Houston that it bought at the same time. Group 1 said the five dealerships have a total of $530 million in annual revenues and, because of Miller’s size in relation to the other stores, it’s presumed that the dealership comprised the bulk of the purchase price. The Miller Group has been family owned for 60 years. The Miller Automotive Group ranked 64th in the United States on the Ward’s “MegaDealer 100” list of top dealerships. The stores will continue to operate under the Miller name and upper management, as well as middle managers at the dealerships, will remain intact, Hollingsworth said. Fred Miller, the company’s CEO, and Mike Miller, president, will remain with the company under three-year contracts. Dave Hutton, COO for Miller Group, has been named platform president of the dealerships by Group 1. In Group 1 parlance, a platform is the core set of dealerships in a market. The company hopes to add to that list of Los Angeles dealerships in coming years. “We like to establish a platform and build with tuck-in acquisitions,” said Hollingsworth, explaining that a tuck-in is a single franchise that is acquired and then “tucked into” the initial core dealership. “We do it for brand augmentation and because it’s more revenue to cover our operating expense budget.” Group 1, with revenues of nearly $4 billion in 2001, already owns 69 dealerships in Texas, Oklahoma, Florida, Georgia, New Mexico, Colorado, Louisiana and Massachusetts. Net income increased 36 percent to $19.1 million or $0.78 per diluted share, on revenues of just over $1 billion in the second quarter ended June 30. In releasing its second-quarter results, the company gave earnings guidance of $2.75 to $2.85 per share for the full year. Following the Miller acquisition, Group 1 raised the guidance to $2.80 to $2.90. The acquisition places Group 1 into the largest automotive market in the country, with the dominant brands in Southern California. “Nationally, these brands have about a 20-percent market share,” said Hollingsworth, referring to the Japanese marquees. “In the L.A. market, those brands have about a 40-percent market share, so those are the brands we want to be in.” The acquisition mirrors a growing trend away from family-owned dealerships. Individual dealer groups under Group 1, which went public in 1997, operate autonomously, but take advantage of a number of economies of scale and corporate benefits. Because of its size, Group 1 can borrow money more cheaply than can a small, private dealer, lowering the cost of inventory along with other costs, such as insurance for the vehicles on the lots. And Group 1 provides corporate employee benefits packages which are typically not affordable to mom-and-pop retailers. Fred Miller declined to comment on the details of the sale, referring calls to Group 1. Hollingsworth said the family’s decision to sell was part of an exit strategy. “Their business has been in the family for almost 60 years,” said Hollingsworth. “They reached the decision where they needed to get their estate in liquid order and prepare for their eventual retirement. This provided them an outlet.”