UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the |
Date of Report: June 15, 2014
(Date of earliest event reported)
Lithia Motors, Inc.
(Exact name of registrant as specified in its charter)
OR
(State or other jurisdiction
of incorporation)
001-14733
(Commission File Number)
93-0572810
(IRS Employer
Identification Number)
150 N. Bartlett St, Medford, OR
(Address of principal executive offices)
97501
(Zip Code)
541-776-6401
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
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Item 1.01. Entry into a Material Definitive Agreement Stock Purchase Agreement On June 14, 2014, Lithia Motors, Inc., an Oregon corporation, and DCH Auto Group (USA) Limited, a British Virgin Islands corporation ("Seller"), entered into a stock purchase agreement (the "Agreement") pursuant to which Lithia will acquire all of the outstanding shares of DCH Auto Group (USA) Inc. Under the Agreement, Lithia will purchase DCH for a price equal to a fixed payment for goodwill plus the tangible net worth of DCH at the closing date. Lithia estimates the purchase price will be approximately $362.5 million, comprised of $340 million in cash and $22.5 million payable in Lithia Class A Common Stock (approximately 300,000 shares). Before the completion of the acquisition, DCH will redeem the shares held by holders of DCH stock other than Seller, or Lithia will complete the acquisition of 100% of the DCH stock through a post-closing short-form merger. The completion of the transaction is subject to customary closing conditions, including Lithia's receiving adequate financing to complete the purchase, regulatory approvals and required auto manufacturer approvals. The Agreement contains customary representations, warranties, covenants and indemnification obligations of the parties customary for a transaction of this type, including covenants relating to DCH's conduct of its business between the date of the Agreement and the closing of the transaction. The representations, warranties and covenants contained in the Agreement were made only for the purposes of the Agreement and as of specific dates, were made solely for the benefit of the parties to the Agreement and may be intended not as statements of fact, but rather as a way of allocating risk to one of the parties if those statements prove to be inaccurate. In addition, the representations, warranties and covenants may be qualified by certain disclosures not reflected in the text of the Agreement and may apply standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors in, Lithia. Lithia's shareholders and other investors are not third-party beneficiaries under the Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of Lithia or DCH or any of their respective subsidiaries or affiliates. The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement which Lithia intends to file as an exhibit to its quarterly report on Form 10-Q for the period ending June 30, 2014. A press release announcing the transaction is filed as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: June 15, 2014 |
LITHIA MOTORS, INC.
By: /s/ John F. North III |
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| Exhibit No. | Description |
| 99.1 | Press Release of Lithia Motors, Inc. dated June 15, 2014 |
MEDFORD, OR -- (Marketwired - June 15, 2014) - Lithia Motors, Inc. (NYSE: LAD) and DCH Auto Group Limited have entered into a definitive agreement to combine their companies. In the transaction, Lithia will acquire 100 percent of the outstanding shares of DCH Auto Group Inc., one of the 10 largest dealer groups in the country, for an estimated price of approximately $340 million in cash and $22.5 million, or approximately 300,000 shares of Lithia common stock. Upon closing, DCH's 27 stores, located in Southern California, New Jersey and New York, will be combined with Lithia's 101 stores in the Western United States. The DCH stores are estimated to generate approximately $2.3 billion in annualized revenue, and are expected to increase 2014 earnings per share by approximately $0.12 to $0.14, excluding acquisition costs. On an annualized basis, the DCH stores are expected to increase earnings per share by $0.65 to $0.75.
The transaction is expected to be funded through the expansion of Lithia's existing credit facility by $600 million, mortgage financing of $200 million, and available cash flows from operations. It is targeted to close in the fourth quarter of 2014, and is subject to customary approval conditions. Lithia expects to incur pre-tax costs associated with the transaction of approximately $0.04 to $0.06 per share in 2014.
DCH operates 14 stores in Southern California and 13 stores in New Jersey / New York. DCH's brand mix is 44% Honda, 30% Toyota, 7% BMW, 5% Acura, 4% Nissan, 3% Lexus, 3% Audi, 2% CJD and 2% Kia. The DCH stores will continue to be led by the current management team, with George Liang, DCH's President, reporting directly to Bryan DeBoer, Lithia's President and CEO. After the transaction is completed, it is expected that Shau-Wai Lam, DCH's founder, will join the Lithia Board of Directors.
This combination develops a metro market strategy for Lithia, as the DCH stores are located in the greater metropolitan areas of New York and Los Angeles. The addition of the DCH team allows the combined organization to pursue two growth opportunities: the exclusive franchise, small- to medium-size market strategy that is Lithia's hallmark and the large metropolitan market strategy the DCH management team has honed since the 1970s. Together, the combined organization will be able to leverage best-in-class execution around customer satisfaction, sales volume and cost control.
Bryan DeBoer, President and Chief Executive Officer, commented, "For the past several years, we have been seeking a strategic partner to help us to enter the Eastern United States. The DCH organization is an ideal fit with our existing team. We share similar strategic goals and core values, and have complementary strengths. DCH has proven their ability to 'Deliver Customer Happiness' while executing a high volume strategy in metro markets. Lithia embodies continuous improvement and produces sector leading operating efficiency. Together, the organization will be able to grow in multiple markets, learn from each other, and deliver improved efficiencies due to scale."
Conference Call and Presentation
Lithia's management will host a conference call on Tuesday, June 17, 2014 at 9:00 am EDT to discuss the pending transaction.
The call may be accessed by telephone at 877-407-8029. To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.
A presentation highlighting information about the proposed transaction has been added to www.lithiainvestorrelations.com.
About Lithia
Lithia Motors, Inc. is the eighth largest automotive retailer in the United States. Lithia sells 28 brands of new vehicles and all brands of used vehicles at 101 stores in 12 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.
Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
www.assuredservice.com
Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors
Lithia Motors on Twitter
http://twitter.com/lithiamotors
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," or "will" and similar references to future periods. Examples of forward-looking statements in this press release include the following items:
By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth from time to time in our filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.
Contact: John North VP Finance and Controller (541) 618-5748