Group 1 Automotive to sell Brazil operations

Houston-based Group 1 Automotive Inc. (NYSE: GPI) is exiting the Brazil market, which will leave the company with 174 automotive dealerships in the U.S. and the U.K.

A subsidiary of Group 1 will sell the entire Brazil operations to an affiliate of Simpar S.A, a publicly listed company in Brazil, Group 1 announced after markets closed Nov. 12. The purchase price is 510 million Brazilian real, or about $93.42 million at the current exchange rate, and will be paid in cash.

The deal is expected to close before the end of the second quarter of 2022 and is subject to manufacturers' approval.

Group 1's Brazil business operates 17 dealerships, which retailed over 8,131 new and used vehicles and accounted for approximately 2.3% of Group 1's total revenues in 2020.

"Over the past eight years, we developed a successful automotive dealer group in Brazil representing Land Rover, BMW, Honda and Toyota," said Earl J. Hesterberg, Group 1's president and CEO. "Unfortunately, despite our best efforts, we were unable to attain critical mass or meaningful scale. Therefore, we decided that redeploying the capital invested in our Brazilian operations to other near-term growth opportunities is in the best interest of our shareholders."

So far this year, Group 1 has acquired companies with revenues totaling $655 million. The company also expects to complete its previously announced acquisition of Westwood, Massachusetts-based Prime Automotive Group's assets in November. When that $880 million deal closes, the acquired revenues figure will increase to $2.5 billion, and the dealership count will increase by 30.

On Oct. 28, Group 1 reported an all-time record third quarter 2021 net income per diluted share of $9.33, a 36.5% increase from $6.83 per diluted share a year earlier, which was also a record at the time. Net income was $172.1 million in Q3, up 36.1% from $126.4 million in Q3 2020, and revenue was $3.5 billion, up 15.4% year over year.

"Continued strong vehicle margins, further improvement in our service volume, and diligent cost control delivered this quarter's impressive results," Hesterberg said in an Oct. 28 statement. "We continue to sell most new vehicles almost immediately upon manufacturer delivery. Assuming no material change in consumer demand, this dynamic should continue throughout the fourth quarter and into 2022."

Group 1 is No. 16 on the Houston Business Journal's 2021 Largest Houston-Based Public Companies List, based on its 2020 revenue of $10.85 billion. The company is also No. 286 on this year's Fortune 500 list. In addition to its auto dealerships, Group 1's business also includes 247 franchises and 49 collision centers.

The investment firms of Laplace Finanças Empreendimentos Participações Ltda acted as financial adviser to Group 1 Automotive in the sale of its Brazil business.