AutoNation CEO Says Acquisitions Will Probably Resume

AutoNation Inc. (AN), the largest U.S. retailer of new vehicles, is negotiating to acquire several dealerships and sees pricing disputes that have held up deals this year being settled, its top executive said.

“We have quite a number of deals in discussion that we would very much like to do,” Chief Executive Officer Mike Jackson said today by telephone after the company reported a quarterly profit that missed analysts’ estimates by 1 cent a share. “There’s still a gap between sellers and buyers that has to be bridged.” Jackson declined to provide estimated revenue of the outlets AutoNation is considering purchasing.

AutoNation has foregone acquisitions this year after spending $64.2 million on purchases through last year’s first nine months, the Fort Lauderdale, Florida-based company said today in a statement. Third-quarter net income rose to $81.6 million from $70.7 million a year earlier. Profit from continuing operations climbed to 66 cents a share, missing the 67-cent average estimate of 13 analysts surveyed by Bloomberg.

Acquisition activity by public U.S. auto retailers including AutoNation plunged 55 percent in this year’s first half to $103 million, according to Presidio Automotive, an advisory firm. Spending on acquisitions probably fell further behind last year’s pace through the third quarter, Alan Haig, a managing director for Presidio based in Chapel Hill, North Carolina, said last week in a telephone interview.

Pricing ‘Standoff’

There is a backlog of dealers looking to sell stores, Jackson said, citing the decline in acquisitions during the U.S. auto market’s plunge to a 27-year low in 2009. Spending on acquisitions by public companies fell three straight years to $16 million in 2009 from $812 million in 2006, according to Presidio.

Pricing disagreements have caused slower activity this year, Jackson said.

“It’s a little bit of a standoff, that, at a certain point, I think the market will set to a common ground that makes sense, and then probably there will be quite a number of transactions,” he said. “I just can’t say when.”

AutoNation’s first priority on capital spending is existing outlets, and the company approved projects in the last quarter including a more than $100 million investment in renovating and updating 36 of its General Motors Co. (GM) stores, said Michael Maroone, AutoNation’s chief operating officer.

The retailer is almost finished with even larger expenditures for a similar program with its Toyota Motor Corp. (TM) business and has completed investments in its Mercedes-Benz stores, Maroone said in a telephone interview.

AutoNation also may consider introducing a dividend, Michael Short, the company’s chief financial officer, said today on a conference call.

AutoNation declined 4.7 percent to $45.76 at the close in New York. The shares have climbed 24 percent this year.

To contact the reporter on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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