CarHop Acquires Auto Master Stores
Last updated Wednesday, January 7, 2009 2:54 PM CST in Business
By Kim Souza
THE MORNING NEWS
SPRINGDALE -- Used car dealer Auto Master was recently acquired by Minnesota-based CarHop for slightly more than $4.72 million, according to a regulatory filing with the Securities and Exchange Commission.
Car lots in Fayetteville, Springdale and Rogers were part of the deal that also included locations in Little Rock and Fort Smith, as well as three sites in Oklahoma and two Texas stores in the Dallas area.
The deal is expected to be completed in the first quarter of this year, said Don Griffin, president of CarHop. The company has been in business since 1996 and currently operates 24 auto sales locations in six states.
Griffin said the transition is underway with temporary CarHop signs going up at the Arkansas stores.
He said until CarHop gets its Arkansas license, the stores are formally still Auto Master. Griffin expects to get the license in the next week or so.
Auto Master was owned by Dallas-based First Cash Financial Services that announced it was exiting the automotive business in September after failed efforts to improve underwriting, inventory quality and collection procedures in a difficult economy weighing heavy on its customers.
"We have liquidated our inventories for what we view to be a fair price and we expect to realize significant future cash flow from the collection of our existing notes receivable portfolio," First Cash CEO Rick Wessel, said in a news release.
Under the terms of the agreement, CarHop purchased Auto Master's automobile inventories, assumed leases at all existing dealership locations and hired a significant number of Auto Master's personnel, the filing indicated. Auto Master's accounts receivable were not part of the cash deal with CarHop.
Instead, CarHop will manage Auto Master's outstanding portfolio of customer loans receivable under a fee-based agreement. CarHop will receive a fee of 15 percent for collecting payments up to $25 million, rising to 50 percent for the next $10 million and 100 percent on the next $1 million, according to the filing.
Wessel said the collection agreement with CarHop provides a mechanism for First Cash to collect on the existing portfolio of notes receivable, with the ability to maximize those collections over the next 24 to 30 months, using CarHop's experience and dealer network.
Griffin said evaluating the market value of loan portfolios is tough in this credit environment, which made selling the loan portfolio difficult.
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