Sonic Automotive to Acquire RFJ Auto Partners; Shares Rise 2.3%

Sonic Automotive, Inc. (SAH), one of the largest automotive retailers in the United States, recently announced that it has signed a definitive agreement to acquire auto retail platform RFJ Auto Partners, Inc. The financial terms of the deal, which is likely to conclude in December, have been kept under wraps.

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Following the news, shares of the company appreciated 2.3% on Wednesday. The stock further gained 1.8% to close at $56 in extended trade.

RFJ Auto, which has 33 locations in seven states and a portfolio of 16 automotive brands, generated revenues of about $2.8 billion in 2020.

The company expects the buyout to add $3.2 billion in annualized revenues.

The CEO of Sonic Automotive, David Smith, said, “RFJ Auto’s management team – many of whom are former members of the Sonic family and have deep familiarity with our guest-centric mindset and innovative sales model – and the nearly 1,700 RFJ Auto teammates are an excellent fit with the culture and growth strategy of our franchised dealership business. As such, we anticipate seamless integration and expect to capture meaningful synergies from ‘day one,’ creating significant long-term value for our shareholders.” (See Sonic Automotive stock chart on TipRanks)

On September 16, Bank of America Securities analyst John Murphy reiterated a Buy rating on the stock. The analyst, however, raised the price target to $78 from $68, which implies upside potential of 41.8% from current levels.

The Wall Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 2 Buys and 1 Hold. The average Sonic Automotive price target of $66.50 implies that the stock has upside potential of 20.9% from current levels.

Sonic Automotive scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Shares have gained about 40.7% over the past year.