Warren Buffett, whose huge conglomerate already owns four companies in Fort Worth, is adding several area car dealerships.
The billionaire’s Berkshire Hathaway, owner of businesses ranging from the Fort Worth-based BNSF Railway to Dairy Queen, Geico insurance and power providers, is buying the privately-owned auto dealership company Van Tuyl Group. Financial terms were not disclosed.
Van Tuyl Group says it is the biggest privately-owned auto dealership group in the U.S., with 78 independently operated dealerships and more than 100 franchises in 10 states. In Tarrant County, the company owns Grapevine Ford, Grapevine Lincoln, Texas Toyota, Texas Nissan of Grapevine and the Vandergriff dealerships — Acura, Chevrolet, Honda, Hyundai, Scion and Toyota — in Arlington.
The company will be renamed Berkshire Hathaway Automotive and be based in Dallas.
Buffett, in an interview on CNBC, said that there are huge opportunities for market consolidation in the fragmented auto dealership business.
“This is just the beginning for Berkshire Hathaway Automotive,” Buffett said.
This deal is one of a handful of times Buffett has applied his conglomerate’s name to one of its businesses. In 2012, Berkshire Hathaway Home Services was created, and the national real estate franchise network continues adding agents at a brisk pace.
A couple of insurance companies carry the name, including Berkshire Hathaway Specialty Insurance. And earlier this year, the company’s utility division was renamed Berkshire Hathaway Energy.
Originally, Berkshire Hathaway was the name of the struggling New England textile company that Buffett took control of in the 1960s. Buffett later closed the textile mills, but he has built Berkshire into a conglomerate known for its financial strength. In addition to BNSF, Berkshire Hathaway, based in Omaha, Neb., also owns Acme Brick, Justin Brands and TTI in Fort Worth.
Van Tuyl Group’s current CEO, Larry Van Tuyl, will become chairman of the auto unit. Cecil Van Tuyl, Larry’s father, started with a Kansas City Chevrolet dealership in 1955. He was joined in the family business by Larry in 1971, according to the company’s website.
Jeff Rachor will become CEO once Larry Van Tuyl transitions to the chairman position.
Buffett said that Van Tuyl’s job will be to scout out dealerships for potential acquisitions and determine which ones to pursue. Buffett will provide the funding for any possible transactions.
“We’ve got the capital so we’re off to the races,” he said.
Berkshire investor and biographer Andy Kilpatrick said this deal looks like it represents another long-term move into a new business for the company. Plus, it puts some of Berkshire’s roughly $55 billion in cash to work.
“I think it’s a major operating business,” said Kilpatrick, who wrote Of Permanent Value: The Story of Warren Buffett.
Stifel analyst James Albertine said the deal puts Berkshire in good position to take advantage of trends in the industry and acquire dealers who either need to plan for succession or need capital to invest.
“We continue to believe the opportunity to consolidate the auto dealership sector presents one of the best medium-to-long term growth opportunities across retail,” Albertine said in a research note.
The deal is expected to close in 2015’s first quarter. It still needs approval from major auto manufacturers.