The billionaire investor, Warren Buffett, has made his debut in the auto industry by agreeing to buy America’s fifth largest auto retailer with plans to buy more dealerships over time.
The billionaire investor on Thursday agreed to buy America’s fifth-largest auto retailer and use it to launch a consolidation of the highly fragmented business.
His Berkshire Hathaway Inc. would acquire an about $8 billion retail business with operations from Florida to California, and use it to snap up family-owned dealerships elsewhere. The retailer, which will be named Berkshire Hathaway Automotive, can leverage Berkshire’s other companies to provide car sales, financing and related services.
he move comes as car-retailing is poised to undergo significant changes that provide greater efficiencies. Dealer profits have been rising as auto makers culled less financially stable businesses during last decade’s financial crisis. Customers also have embraced the Web to shop for cars, cutting dealer overhead costs.
“We’re certainly thinking big and would like to grow the business,” said Jeff Rachor, president of Phoenix-based Van Tuyl Group, which Berkshire agreed to acquire in an all-cash deal. The purchase price wasn’t disclosed.
Mr. Rachor, who will become Berkshire Hathaway Automotive’s chief executive, said the new company intends to pursue dealer acquisitions in the South and Midwest where Van Tuyl already has stores, relying on its new owner’s deep pockets. He estimated there are about 5,000 dealerships that have the scale that match its acquisition goals.
Van Tuyl, a closely held business that was founded in Kansas City nearly 60 years ago, owns dealerships that now sell about 240,000 vehicles a year. The company has been controlled by Larry Van Tuyl, the founder’s son who will become chairman of the new business.