Lithia Finally Enters the U.K. With Large Jardine Acquisition
We are not changing our Lithia Motors LAD fair value estimate after the company announced the acquisition of U.K. dealer Jardine Motors Group. Terms were not disclosed and Lithia CEO Bryan DeBoer in an Automotive News interview said the deal was on more favorable terms than U.S. acquisitions. We estimate the price at between $400 million to $500 million and Lithia said the deal was financed from existing balance sheet capacity (that is cash and credit lines).
Jardine has over 50 stores solely selling premium luxury brands such as Aston Martin, Audi, BMW, Ferrari, McLaren, Mercedes, and Porsche and is the 23rd largest European dealer group per Automotive News. Lithia said the deal will generate over $2 billion in annualized revenue, and we are modeling the company acquiring $4 billion in annual revenue in 2023. We will wait for first-quarter earnings to see if management updates its plan given on Feb. 15 of up to $4 billion acquired revenue for 2023, but additional funds for acquisitions will likely mostly, if not entirely, be offset by the time value of money adjustment in our model. DeBoer also said Jardine CEO Neil Williamson will stay on with Lithia and that Williamson wanted to pursue growth while Jardine’s parent company, Hong Kong-based Jardine Matheson, was looking to divest. Lithia’s aggressive 2025 growth plan to reach $50 billion in revenue ($28.2 billion in 2022) makes the two entities a natural fit.
We like the deal and the wealthy customer brand mix it brings, plus it signals to other sellers that Lithia is serious about the U.K. It’s no secret that Lithia was looking to enter the U.K., as management has talked for years about foreign expansion into English-speaking countries (Lithia entered Canada in 2021) and Sky News last summer said the firm tried to buy Pendragon, the seventh largest European dealer. We expect the U.S. to remain the main acquisition focus, but we expect more U.K. deals over time and perhaps into continental Europe, as Penske has done.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.