In a recent announcement, Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) said that it is going to acquire Van Tuyl Group, which ranks fifth among all U.S. auto dealership groups. With over $8 billion in revenue, 78 independently operated dealerships and over 100 franchises in 10 states, including Arizona, California, Florida, Georgia, Illinois, Indiana, Missouri, Nebraska, New Mexico and Texas, it is the largest privately owned U.S. auto dealer.
Summary
After the acquisition, the company will continue with the name of Berkshire Hathaway Automotive. Berkshire Hathaway Automotive will continue to be led by Larry Van Tuyl, who will become chairman, and Jeff Rachor, who will assume the role of chief executive officer, as well as its experienced senior management team. Berkshire Hathaway Automotive will be headquartered in Dallas, Texas, and will continue to pursue its strategy of operational excellence and disciplined acquisition growth, which is no change to the business model the company has pursued for the last 62 years.
The Van Tuyl Group fits perfectly into Berkshire Hathaway from both a financial and cultural viewpoint. Larry Van Tuyl, along with his father, Cecil, spent decades building outstanding dealerships operated by local partners. In recent years, he has shared management with Jeff Rachor, a seasoned auto retailer who will retain a financial interest in all dealerships. The Van Tuyl Group enjoys excellent relations with the major auto manufacturers and delivers unusually high volumes at its 78 locations. This is just the beginning for Berkshire Hathaway Automotive,” said Berkshire Hathaway’s Chairman and Chief Executive Officer, Warren Buffett (Trades, Portfolio).
“We are proud of all that has been accomplished with the support of our dealer partners, our employees and the manufacturers that we represent. We are very pleased to have one of the world’s most respected companies, Berkshire Hathaway, assume ownership of our company with the commitment to preserving our unique culture, business model and philosophy,” said Larry Van Tuyl, current chief executive officer of the Van Tuyl Group. “I cannot think of a better steward to continue the legacy of what my father and I have built over the last 62 years, and I am confident his transaction will position the company on a course of continued success.”
The transaction is expected to be completed in the first quarter of 2015 and is subject to obtaining approvals from the major auto manufacturers as well as certain customary closing conditions, including various regulatory approvals. (Source: Company’s Website)
To end
Berkshire has a diversified range of businesses in its kitty- building, construction, railroads, insurance, to name a few. Warren Buffett (Trades, Portfolio) has always been drawn towards diversified businesses. This can be seen from the number of diversified acquisition he has made in all these years.
The auto industry is recovering and getting a lot more healthier. Berkshire Hathaway is new to this industry of dealership, but it can benefit from this recovering industry. Adding the name of Berkshire to this dealership company is enough to attract customers. There is much money to be made from this industry.
The Van Tuyl Group has an array of businesses to offer- auto auction, insurance and retail sales. Warren Buffett (Trades, Portfolio) expects to buy a lot more dealership businesses over time. This addition of car dealership business is expected to give more room for growth to Berkshire Hathaway.
Buffett believes that car dealership companies are well run and are good businesses to put your money into. Car dealership companies have started to witness healthy profits. Investing in these companies may provide good returns in the near future.
