Crown Group to Acquire Ownership of Smart Choice Automotive
30 August 1999
Crown Group to Acquire Majority Ownership of Smart Choice Automotive Group; Crown's 85%-Owned PAACO Automotive Group Subsidiary to Merge Into Smart Choice
DALLAS--Aug. 27, 1999--Crown Group, Inc. and Smart Choice Automotive Group, Inc. today announced that they have entered into a nonbinding Letter of Intent which provides for the following:| -- | The merger of Paaco Automotive Group, Inc. into Smart Choice, in exchange for approximately 51 million shares of Smart Choice common stock. |
| -- | Proposals to convert approximately $20 million of outstanding Smart Choice indebtedness and preferred stock into approximately 30 million shares of Smart Choice common stock. |
| -- | The loan by Crown to Smart Choice of $1 million in the form of a secured convertible debenture, convertible into Smart Choice common stock at $0.50 per share. |
| -- | The sale to Crown of four million shares of Smart Choice common stock for $2 million. |
The proposed transaction is subject to the execution of a Definitive Agreement and conditions of closing, including the negotiation of an agreement with Smart Choice's senior lender, approval by both companies' boards of directors and Smart Choice's shareholders, satisfactory completion of due diligence, necessary regulatory approvals, and the conversion of substantially all of the $20 million of indebtedness and preferred stock into Smart Choice common stock. Smart Choice's senior lender and the respective holders of the indebtedness and preferred stock have not yet agreed to the terms of the proposal; consequently, there is no assurance that these transactions can be completed.
If the transaction is completed, Crown will become the majority shareholder of Smart Choice, which will remain a publicly-traded company.
"We believe that the combination of Paaco Automotive Group and Smart Choice will result in significant synergies and allow the combined companies to realize their full potential in selling and financing automobiles for 'subprime' customers," commented Edward R. McMurphy, President and Chief Executive Officer of Crown Group, Inc. "Both companies have established a strong presence as industry leaders in their respective niche markets, and recent operational restructurings have reduced costs and improved efficiencies within each organization. Given a rationalized capital structure, which should result from the combination of proposed transactions, we believe that the companies can fully capitalize upon their strong brand names in the Southeast and Southwestern United States."
"We are certainly pleased with this opportunity, which would allow us to take full advantage of the systems and infrastructure that has been developed since the inception of Smart Choice," stated Gary R. Smith, President and Chief Executive Officer of Smart Choice Automotive Group, Inc. "This represents a strategic alliance of two companies that will bring together strong car sales management skills and will provide us the opportunity to maximize the operational and financial strengths of both Smart Choice and Crown Group."
"If the proposed transaction is completed, Crown Group will own a majority interest in 'subprime' auto companies with combined revenues approaching $230 million annually," continued McMurphy. "In addition to our ownership interest in Paaco Automotive Group, Crown also owns 100% of America's Car-Mart, one of the largest 'Buy-Here Pay-Here' used car dealers in the United States. Car-Mart, which has been consistently profitable throughout its 18-year history, underwrites, finances and services retail installment contracts generated by its 35 dealerships located in non-metropolitan markets throughout Arkansas, Oklahoma, Texas and Missouri."
Headquartered in Dallas, Texas, Paaco Automotive Group, Inc. operates 10 used car dealerships in the State of Texas. The dealerships, which cater primarily to an Hispanic clientele, provide installment financing for over 95% of the automobiles which are purchased by its customers. Crown Group, Inc. owns 85% of Paaco.
Smart Choice Automotive Group, Inc. operates a network of 15 used car dealerships in the State of Florida. The Company underwrites, finances and services retail installment contracts generated from the sale of used cars by its dealerships. Smart Choice is headquartered in Titusville, Florida and its common stock trades under the symbol "SMCH".
Crown Group, Inc. seeks to enhance shareholder value through the acquisition, development and operation of small-cap companies with significant growth potential. Crown Group currently owns (i) 100% of America's Car-Mart, Inc. and 85% of Paaco Automotive Group, Inc., vertically integrated used car sales and finance companies; (ii) 100% of Precision IBC, a firm specializing in the sale and rental of intermediate bulk containers; (iii) 80% of Concorde Acceptance Corporation, a sub-prime mortgage lender; (iv) 49% of Casino Magic Neuquen, a casino operator in the Province of Neuquen, Argentina; (v) 50.1% of CGI S.A. de C.V., which operates two casinos in El Salvador; (vi) 80% of Home Stay Lodges, a partnership which is involved in the development and operation of extended-stay lodging facilities; and (vii) 45% of Atlantic Castings, Inc., an investment castings manufacturer of turbine engine components. Crown Group is headquartered in Dallas, Texas, and its common stock is traded on the Nasdaq National Market under the symbol "CNGR".
This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "expect", or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those relating to the development of the companies' businesses, risks associated with acquisitions, continued availability of lines of credit for the companies' businesses, changes in interest rates, changes in the industries in which the companies operate, competition, dependence on existing management, and other risks which are discussed in the companies' periodic filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.