Canadian dealership group Pfaff Automotive Partners, of Toronto, has been acquired by U.S.-based Lithia Motors, confirming news of the imminent deal first reported by Automotive News Canada in July.
Financial terms of the transaction made public Tuesday were not disclosed. But, a Pfaff spokesman said the Canadian group retains an undisclosed equity stake in the operation, noting Lithia owns the majority stake.
It marks Lithia’s first international acquisition as the second-largest U.S. dealership group also targets a goal of 500 domestic locations.
Pfaff, headquartered in Toronto, operates 16 dealerships across Canada — 11 of them in the Greater Toronto Area, the largest market in the country. It also has stores in Vancouver and Calgary. The Canadian dealerships are expected to generate more than US$1 billion in annualized revenues for Lithia, headquartered in Medford, Ore.
"Canada has been our top target for growth outside of the United States with its similar business practices and a market opportunity of five million new and used cars sold annually," Lithia CEO Bryan DeBoer said in a statement. "Beyond its size, Pfaff has an excellent management team, and its locations provide an ideal hub for further expansion.”
DeBoer praised Pfaff’s best-price first approach and captive in-house leasing option, saying Pfaff “perfectly aligns with our technology-enabled online offerings.”
The acquisition of Pfaff makes Lithia the second publicly traded dealership group operating in the Canadian market. AutoCanada, based in Edmonton, Alta., was the sole public dealership group in Canada.
The Pfaff brand will remain, and Chris Pfaff, whose father Hans founded the company in 1964, will continue to serve as president and CEO. A Pfaff spokesman said the entire Pfaff management team will stay on board to run the brand.
The deal also means Lithia will bring its Driveway omnichannel digital retailing platform north of the border.
DeBoer previously said that early learnings from Driveway, rolled out one year ago, demonstrate the potential for the platform to dominate both "domestically and internationally."
Omnichannel refers to technology and processes aimed at providing a seamless buying experience for consumers whether they shop online, in-store or both.
Pfaff said in a statement there currently isn’t a “nation-wide, e-commerce player in Canada.”
“[W]hich is why we believe this partnership will deliver a first-mover advantage in acquiring additional locations and deploying [Lithia’s] innovative, digital platforms across this country,” Pfaff said. "This partnership is borne out of a relationship that spans five years, and we are confident that the cultural alignment between our organizations makes this the perfect launch point for Lithia & Driveway in Canada," said Christopher Pfaff, president and CEO of Pfaff Automotive Partners. "Currently, there is no nation-wide, e-commerce player in Canada,
With a market cap of US $11.55 billion ($14.36 billion) — and 263 dealerships in its portfolio prior to the Pfaff deal, according to the company’s website — Lithia has greater access to capital for expansion than every other dealership group in Canada by a wide margin.
Lithia ranked No. 3 on Automotive News' most recent list of the top 150 dealership groups based in the U.S., with retail sales of 171,168 new vehicles in 2020. But with its April acquisition of 34 stores from Michigan's Suburban Collection, Lithia passed Penske to become the country's second-largest dealership group.
With files from Automotive News and Automotive News Canada.