LMP Automotive Holdings Inc. is planning to terminate its seven pending purchases of numerous auto dealerships and is considering a sale of the company.
“The company intends to terminate all of its pending acquisitions in accordance with the terms of their respective acquisition agreements, primarily due to the inability to secure financial commitments and close within the time frames set forth in such agreements,” LMP CEO Samer Tawfik said in a statement.
The small, publicly traded auto retailer, in a news release on Wednesday, said its board of directors feels its stock price is undervalued. Shares of LMP closed at $6.65 on Tuesday. The shares plunged 21 percent to $5.25 when the market closed Wednesday.
A year ago, the shares were trading for more than $20.
Stock had been part of LMP’s strategy to help pay for at least some of its pending acquisitions.
“Given the record M&A activity in our sector and multiples being paid for these transactions, LMP’s board of directors has directed management to immediately pursue strategic alternatives, including a potential sale of the company,” Tawfik said in the statement.
This week, Automotive News reported that a seller in one planned deal kept a $1.5 million deposit after that deal fell through on Jan. 31. It marked the latest transaction to collapse for the Fort Lauderdale, Fla., company.
Last year, LMP acquired its first franchised dealerships and entered into several contracts to buy additional dealerships. In 2020, the then-used-vehicle and vehicle subscription retailer announced aspirations to roll up dozens of dealerships. It has eight franchised dealerships and four used-vehicle stores in its portfolio.
“Some of the big public companies are making very substantial acquisitions, and that tends to influence investors, but in this case they never really had the capital base to be as aggressive as they were,” said Sheldon Sandler, CEO of Bel Air Partners, a buy-sell advisory firm in Hopewell, N.J., which has written about LMP and is not involved in any transactions with the company.
Sandler said companies generally want to demonstrate to investors that they’re growing, but they also need to have the necessary capital to support that growth.
“LMP never had access to the capital to sustain their growth,” he said. “Their cash flow was inadequate to cover the cost of their growth.”
This month, LMP said it expected in February that it would begin to close “substantially all” its pending deals.
Those contracts, some of which date back to March 2021, include buying:
- An 85 percent stake in Central Avenue Chrysler-Jeep-Dodge-Ram in Yonkers, N.Y.
- Tom Peacock Cadillac and Tom Peacock Nissan in Houston
- Kia of East Hartford in Connecticut
- Zappone Chrysler-Jeep-Dodge-Ram in Clifton Park, N.Y.
- Chantz Scott Chrysler-Dodge-Jeep-Ram in Greeneville, Tenn.
- Yonkers Kia in New York
- An 85 percent stake in 10 new-vehicle dealerships in Florida, a used-car center and a fleet operations outlet from the Alan Jay Automotive Network
In late December, Tawfik said in a news release that LMP had “engaged Bank of America” to help it refinance debt, and this month he said in another release that LMP was working with “prospective lenders to provide the necessary debt financing to consummate these acquisitions.”
“This is still one of the busiest times in M/A history,” said Dave Cantin, CEO of the Dave Cantin Group and whose DCG Acquisitions firm is representing two sellers in pending transactions with LMP. “With recent historical profits, all sellers involved in one of LMP’s transactions will hopefully find a new suitable buyer that has an ability to execute a successful closing.”
Lindsay VanHulle contributed to this report.
https://www.autonews.com/retail/lmp-terminate-pending-dealership-acquisitions-explore-sale-company
