Republic, Toyota Settle Over Dealerships
Republic Industries Inc. put the finishing touches on a settlement Tuesday with Toyota Motor Corp. that clears the way for Republic to quickly add Japanese car dealerships to its chain of new-car showrooms.
The terms of the settlement weren’t disclosed. Toyota sought to block Republic in April, after Republic declined to limit its Toyota dealerships to seven and its Lexus dealerships to three, or wait nine months between dealership purchases.
The settlement, combined with Monday’s court victory over Honda Motor Co., lets Republic sell some of the most-popular sedans in the U.S. on a large scale, including Toyota’s Camry and Honda’s Accord. Republic Chairman Wayne Huizenga said he plans to boost profit and slash advertising and other costs by building his new-car chain, which already is the biggest in the U.S.
“This portends the Wal-Martization of car dealers--fewer, bigger, more powerful dealers,” said Sheldon Sandler, managing director of corporate finance for Ladenburg, Thalmann & Co. “There’s a sea change in the current system.”
Republic shares rose 63 cents to close at $32.94 on the New York Stock Exchange. The stock traded as high as $33.13 earlier, the highest level in almost six months.
The settlement completes a tentative agreement disclosed Aug. 25 by Huizenga. The companies have spent the past month fine-tuning the contract.
Toyota said it will drop all lawsuits against Republic. Republic will be held through December to Toyota’s policy limiting any owner to seven Toyota and three Lexus dealerships, said Toyota spokesman Bob Wade. The number of future purchases allowed wasn’t disclosed. Lexus is Toyota’s luxury brand.
“This removes the No. 1 hurdle Republic has faced,” said Jordan Hymowitz, an analyst with Robertson, Stephens & Co. “There’s no reason now that Republic shouldn’t buy the best and the brightest of the dealerships in the U.S.”
Hymowitz said he expects the agreement to allow Republic to buy Toyota and Lexus dealerships that account for at least 5% of the brands’ U.S. sales. Toyota has 1,194 Toyota and 176 Lexus dealers in the U.S.; 5% would be about 69 dealerships, depending on their size.
On Monday, a federal judge in Los Angeles dismissed Honda’s suit against Republic. Honda said it would appeal and plans to ask state courts to limit the number of Honda and Acura dealerships that Republic may buy.
