The entire Prime Automotive Group portfolio — whose parent company has been accused of operating a Ponzi-like scheme — is up for sale and will be sold as a platform with the aim to complete a transaction by the end of 2021, according to a source familiar with Prime’s plans.
Prime Automotive of Westwood, Mass., with 31 dealerships and three collision centers in the Northeast, is one of the largest dealership groups in the country. It ranks No. 18 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 31,529 new vehicles in 2020.
The Wall Street Journal reported on Monday that Prime’s majority owner GPB Capital Holdings is shopping the group.
A Northeast dealer, who asked not to be identified, told Automotive News that the business submitted a bid in June to Jefferies Financial Group — which the dealer said is working with Prime to market the platform — to buy some Prime stores. The dealer said the offer was turned down because the group was only entertaining proposals to buy the entire Prime portfolio.
Representatives for both Prime Automotive Group and GPB declined to comment.
Automotive News reported in June that the holding company owning most assets of Prime had raised doubts in audited financial statements about whether it could continue as a going concern, given an expiring credit agreement for vehicle floorplanning, mortgages and other debt led by M&T Bank Corp.
A May 14 regulatory filing with the U.S. Securities and Exchange Commission also revealed that some automakers since February had sent franchise termination notices or were threatening to terminate dealer agreements and that the holding company was exploring various options for Prime’s future, such as “co-investments, a spin-off of businesses, a public listing or merger or a sale of individual dealerships or groups of dealerships.”
The expiring credit agreement was extended in June. In a July filing with the SEC, the GPB Automotive Portfolio limited partnership — a holding company that owns 30 of Prime’s 31 dealerships — said that on June 24 it amended its credit agreement with M&T Bank which “alleviated the conditions which previously caused us to conclude that substantial doubt existed about the partnership’s ability to continue as a going concern.”
The credit agreement, which had been set to expire in February of next year, was extended until the end of December 2022 , and money controlled by Prime also was freed up to help the partnership meet its obligations, according to the July filing.
“Based on these amended terms, and the improved liquidity they provide the partnership, we believe that we will have sufficient liquidity to meet our financial obligations for the period of at least 12 months from July 21, 2021 (management’s assessment date),” the July filing said.
The GPB partnership is made up of thousands of investors who raised $682.9 million, which GPB used to buy dealerships. Investors were promised 8 percent annual returns, but distributions stopped in late 2018.
The SEC accused GPB Capital of operating a “Ponzi-like scheme” in a February civil case that named former GPB CEO David Gentile. Gentile and others also were indicted that same month on federal securities fraud and other charges.
Several states also have filed lawsuits against GPB Capital, and a federal monitor was appointed to oversee GPB and the dealership operations as part of the SEC case. The monitor, Joseph Gardemal, did not immediately respond to an email request for comment about plans to sell the Prime dealerships.
The Prime group includes a mix of luxury, import and domestic stores. The partnership in 2020 reported annual revenue of nearly $2.4 billion, down 19 percent from 2019.
Several of the public new-vehicle retailers, as well as some large private dealership groups, could be poised with the necessary capital and automaker relationships to be able to purchase and get manufacturer approvals to buy such a large group as Prime. Many of the public dealership groups have been on buying sprees and are looking to grow.
In April, Lithia Motors Inc. bought Michigan’s Suburban Collection, consisting of 34 dealerships, in a transaction Lithia said is expected to add $2.4 billion in annual revenues.
Lithia, now the nation’s second-largest dealership group based in the U.S., is aggressively expanding through acquisitions as part of a five-year plan to get to $50 billion in annual revenues. Lithia last month said it had dealerships under contract that represent $2 billion in annual revenue and it was reviewing for purchase additional dealerships representing more than $15 billion in annual revenue.
And Asbury Automotive Group Inc., the nation’s sixth-largest dealership group based in the U.S., also wants to add dealerships generating $5 billion in annual revenues over five years. In July, the group said it was reviewing deals for dealerships that could represent nearly $9 billion in annual revenue.