Holman's auto empire gets bigger

Holman Automotive Group

, the largest auto-dealer group based in the Philadelphia area, says it has cut its biggest deal ever, purchasing

Kuni Automotive

and its 14 high-end car dealerships in five Western states.

The deal would double Holman's sales and make it the 12th-largest U.S. car dealer, based on 2015 dealer data from Automotive News.

Holman does more than sell cars. It also owns parts, financing, and multinational vehicle-leasing units. "So we're uniquely positioned for where this business is going, when you talk about ride-sharing, with our fleet-management competency and this expanded geography," chief executive Carl Ortell says.

Pre-merger, Holman operated 19 dealerships and employed 4,800 in Pennsylvania, New Jersey, and Florida. Kuni sold 36,000 new, used, and fleet vehicles last year and collected $1.43 billion in auto sales revenue. Holman sold 40,000 vehicles and topped $1.45 billion in sales.

The combined companies expect auto sales of more than $3 billion and total revenue above $5 billion by next year, Ortell says.

The number of U.S. car dealerships has declined since manufacturers began consolidating their networks during the late 2000s recession. Younger car buyers question the need for auto dealers. Electric-car builder Tesla markets directly to consumers, though repair mechanics say the dealer system helps keep parts prices down.

Will showrooms as we know them still be around in 10 years? "Some buyers still want to negotiate," says Ortell, and Holman is investing in digital tech to reach new buyers. "We want to make sure, whenever you touch one of our businesses" - in a showroom or via smartphone - "you have an unforgettable service experience."

Owning a lot of dealerships is efficient, Ortell adds. "We have centralized accounting and processes, for marketing used vehicles, for financial-insurance products. Bigger isn't always better, but bigger gives you opportunity moms and pops don't have."

The expanded firm will be about one-fifth the size of each of the two largest U.S. auto-dealer groups, AutoNation and Penske Automotive Group Inc. Both are publicly traded. Ortell says Holman's advantage is that it has been family-owned for 92 years, that "the Holman family has never taken a dividend," and it doesn't have to please Wall Street with quarterly earnings reports.

Ortell declines to say what Holman paid for Vancouver, Wash.-based Kuni, whose 1,400 employees run Lexus, Audi, Land Rover, BMW, and Porsche dealerships along the West Coast and in Colorado and Kansas.

Dealerships typically collect a profit margin of 3.5 percent to 5 percent on car sales, and can be sold from about three times earnings (before income tax, depreciation and amortization) up to 10 times earnings, depending on brand and site, says Bruce Jackson, head of retail lending for Chase Auto Finance in New York. That implies a price of several hundred million dollars for a group Kuni's size.

In a statement, Kuni Automotive CEO Greg Goodwin says his company chose Holman to build a company "greater than the sum of its parts."

Besides the dealerships, Holman includes Steward Financial Services (car-purchase finance), Holman Parts Distribution (multibrand power-train parts distributor), Auto Truck Group (truck manufacturing), and ARI, which Holman calls "the largest privately owned fleet leasing and management company in North America."

JoeD@phillynews.com

215-854-5194 @PhillyJoeD

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