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Group 1 Automotive Inc GPI

Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

We Feel Group 1 Exiting Brazil Is a Good Move Long Term

Analyst Note

| David Whiston, CFA, CPA, CFE |

On the evening of Nov. 12, Group 1 announced an agreement for the sale of its Brazilian operations for BRL 510 million (about $93.5 million) to Original Holdings S.A., an affiliate of Simpar S.A., a publicly listed holding company in Brazil that owns auto dealerships as well as car rental operations and truck logistics services. Group 1 says it has 16 dealerships in Brazil while Simpar’s release says it’s buying 20 stores. We think the difference is collision centers. Group 1’s time in Brazil goes back to its February 2013 acquisition of UAB that we estimate it paid about $131 million for in cash and stock. We are leaving our fair value estimate in place as modeling the deal does not result in a material change to our valuation. Management expects the deal to close before the end of second quarter 2022 and it is still subject to automaker approval.

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Company Profile

Business Description

Group 1 owns and operates 49 collision centers and 191 automotive dealerships across 248 franchises in the U.S., the U.K., and Brazil, offering 33 brands of automobiles altogether. U.S. locations are mostly in metropolitan areas in 15 states in the Northeast, Southeast, Midwest, and in California. Revenue in 2020 totaled $10.9 billion. The company was founded in 1995 and is based in Houston. The company is scheduled to buy 30 stores and three collision centers in New England from Prime in November, which was about the 20th largest U.S. auto dealer group and had $1.8 billion of 2020 revenue.

Contact
800 Gessner, Suite 500
Houston, TX, 77024
T +1 713 647-5700
Sector Consumer Cyclical
Industry Auto & Truck Dealerships
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 12,337

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