Crown Group, Inc. to Acquire Majority Stake in West One Automotive
9 February 2000
Crown Group, Inc. to Acquire Majority Stake in West One Automotive; $75 Million Automotive Retailer and Operator of Hertz Franchises Marks Crown's Expansion Into Western U.S.
DALLAS--Feb. 9, 2000--In accordance with its strategy to become the largest retailer of used vehicles in the country, Crown Group, Inc. (Nasdaq Nat'l Mkt: CNGR) today announced that it has entered into a Letter of Intent to acquire 80% of the outstanding stock in West One Automotive Group, Inc., a large Hertz rental and retail automotive business. Upon completion of the acquisition, Crown Group will secure its position as the nation's second largest automotive retailer focused exclusively on the used car market. Consummation of the transaction is subject to certain conditions, and closing is expected in March of 2000.The acquisition, which is valued at $10 million, will allow Crown Group to combine its resources and expertise in the automotive sales and finance industry with the strength of the world-renowned brand image of Hertz. Crown's strategy of buying used automotive retailers that are clear leaders in their markets has been very successful thus far, evidenced by an aggregate 117% expected increase in revenue and 837% expected increase in pretax earnings in its auto subsidiaries from fiscal year 1999 to fiscal year 2000. Due to a highly fragmented used car industry, Crown Group is positioned to benefit from the consolidation opportunities that exist within the market. By focusing its growth strategy on the used car industry, which offers substantially higher margins than those of new car retail markets, Crown should earn premium returns on its invested capital through synergies created within its large, consolidated operations and capitalize on the established regional brands of its Smart Choice, Paaco and America's Car-Mart subsidiaries.
West One Automotive Group, Inc. ("West One"), headquartered in Portland, Oregon, owns and operates eleven Hertz Rent-A-Car franchises in Washington and Oregon, as well as three Hertz auto dealerships in Bend, Oregon, and Tri-Cities and Yakima, Washington. The company, which has been in operation since 1976, is the foremost used auto retailer in the Oregon and Washington markets in which it operates. In the year ended December 31, 1999, West One generated revenues of approximately $75 million, and expects revenues to exceed $100 million in calendar year 2000.
West One's auto dealerships retail vehicles which were previously utilized in the company's car and truck rental operations, as well as other well maintained autos. Automobiles purchased for rental operations are typically less than one year old and have accumulated fewer than 10,000 miles. The cars, which then spend from three to nine months in West One's rental fleet before being offered for sale through its retail dealerships, are sold with their factory warranties intact for an average selling price of $15,000. Since the majority of West One's cars are rented by executive travelers for business purposes, wear and tear is typically less than that of a privately owned car. This, combined with a stringent three-day-a-week maintenance regimen, by and large allows West One to offer a superior used vehicles at competitive prices.
"We believe that the acquisition of West One Automotive is an important step in Crown's expansion strategy, and we are excited to add another market leader to our family of auto businesses," noted Edward R. McMurphy, President and Chief Executive Officer of Crown Group, Inc. "We expect West One, which will remain under the management of CEO Ted Anderson and his experienced team of executives, to make an immediate and significant contribution to Crown Group's revenues and earnings, driving fiscal year 2000 revenues beyond $350 million. The company has clearly developed a highly successful business model and will continue to benefit from its long-standing relationship with Hertz Corporation, which has one of the strongest brand names in the world."
"We are particularly impressed with West One's ability to optimize the performance of its corporate assets," continued McMurphy. "The company has among the highest inventory turnover rates in the automotive retailing industry, and the ownership of retail dealerships allows management to more effectively manage its rental fleet on a seasonal basis. When cars are ready to leave the rental fleet, West One sells them at retail through its dealerships, rather than wholesaling the vehicles through the standard auction process. The use of these sound business practices, combined with West One's industry know-how, should ensure long-term stability and profitability in the business."
"Crown Group has emerged as a leader in the used car retailing industry, and we believe that West One's operations are very compatible with Crown's long-term growth strategy," stated Ted Anderson, Chief Executive Officer of West One Automotive Group, Inc. "West One just completed the most successful year in its history, and management's confidence in the company's future success is evidenced by our recent acquisition of two Hertz rental car franchises this past week, and our plans to open two more Hertz retail superstores during the year 2000."
West One currently has approximately 650 cars in its rental fleet, and the company sold an impressive 3,700 vehicles through its three retail dealerships in 1999. During its first year of operation (1999), the Bend, Oregon superstore, which is a prototype for future expansion, received numerous architectural awards, carried an average inventory of 160 cars, and generated sales of approximately $25 million.
Crown Group, Inc. sells and finances used automobiles through its 99% ownership of America's Car-Mart, Inc. and its 70% ownership of Smart Choice Automotive Group, Inc. (OTC BB: SMCH). The Company also seeks to enhance shareholder value through the acquisition, development and operation of small-cap companies with significant growth potential. In addition to its used car sales and finance operations, Crown Group currently owns (i) 100% of Precision IBC, Inc., a firm specializing in the sale and rental of intermediate bulk containers; (ii) 80% of Concorde Acceptance Corporation, a sub-prime mortgage lender; (iii) 50.1% of CG Incorporated S.A. de C.V., which operates two casinos in El Salvador; and (iv) 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, Crown Group undertakes no obligation to update these statements for revisions or changes after the date of this release.
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