Group 1 Automotive Plans Sale of Brazil Operations

Group 1 Automotive (GPI) revealed that its wholly owned subsidiary GPI SA, LLC has inked a deal with Original Holdings S.A to sell the company’s operations in Brazil in an all-cash transaction worth BRL 510 million.

Per the terms of the deal, Original will acquire 100% of the entire interests of UAB Motors Participações Ltd.

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Implications of the Transaction

UAB operated 17 dealerships as of year-end 2020 and generated annual revenue of BRL 1.264 billion, representing 2.3% of the total revenues of Group 1. Upon completion of the divestiture, GPI’s worldwide dealerships will reduce to 174 including the 30 new dealerships to be added from pending deals.

The deal is expected to close by the end of the second quarter of 2022, subject to certain regulatory approvals.

CEO Comments

Group 1 CEO Earl J. Hesterberg stated, “Over the past eight years we developed a successful automotive dealer group in Brazil representing Land Rover, BMW, Honda and Toyota. Unfortunately, despite our best efforts, we were unable to attain critical mass or meaningful scale.”

Consequentially, he added, “we decided that redeploying the capital invested in our Brazilian operations to other near-term growth opportunities is in the best interest of our shareholders.”

Wall Street’s Take

Stephens analyst Rick Nelson recently increased his price target on Group 1 Automotive Inc. to $225 (8.7% upside potential) from $220, and reiterated a Buy rating.

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on two Buys. The  Group 1 Automotive price target of $217.50 implies 5.1% upside potential to current levels.

TipRanks data shows that financial blogger opinions are 88% Bullish on GPI, compared to a sector average of 69%.

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