SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 9, 1998
SONIC AUTOMOTIVE, INC.
(Exact name of Registrant as Specified in Charter)
Delaware 1-13395 56-2010790
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5401 East Independence Boulevard
P.O. Box 18747
Charlotte, North Carolina 28218
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (704) 532-3320
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
(A) DEBT OFFERING. On July 9, 1998, the Company issued a press release
that is attached to this report on Form 8-K as Exhibit 99.1.
(B) PENDING ACQUISITIONS. The Company has entered into agreements
regarding the Company's acquisition, as described in this Section (B), of
certain automobile dealership businesses and assets (collectively, but
excluding the Hatfield Acquisition (as defined below), the "Pending
Acquisitions"). The operations being acquired in the Pending Acquisitions
generally consist of selling new and used cars and light trucks, selling
replacement parts, providing vehicle maintenance, warranty, paint, collision and
repair services, and arranging customer financing and insurance. None of the
Pending Acquisitions have been consummated as of the date of this filing. The
Pending Acquisitions are anticipated to be consummated, subject to certain
closing conditions (including but not limited to the receipt of consents to the
acquisitions from the relevant automobile manufacturers that provide vehicle
inventories to the businesses being acquired), in the third quarter of 1998.
The estimated aggregate purchase price payable by the Company for the
Hatfield Acquisition, the Pending Acquisitions and the Higginbotham Acquisition
(as defined in Section (C) below) is approximately $110.1 million. Of this
aggregate purchase price, approximately $75.0 million will be paid in cash and
the balance will be paid by the Company through the issuance to the respective
sellers of shares of the Company's Class A Convertible Preferred Stock, par
value $.10 per share, having an aggregate liquidation value of approximately
$35.1 million. The Company will fund the cash portion of the purchase price
payable at closing of each of the Hatfield Acquisition, the Pending Acquisitions
and the Higginbotham Acquisition by increasing the Company's long-term debt
borrowings. Certain of the Pending Acquisitions will require the Company to pay
contingent purchase prices based on the future performance of the acquired
businesses, which are expected to be funded with cash from future operations or
from long-term debt borrowings. The total amount of consideration to be paid by
the Company in each of the Hatfield Acquisition, the Pending Acquisitions and
the Higginbotham Acquisition was determined through arms'-length negotiations
with each of the respective sellers.
Certain audited financial statements for the Hatfield Acquisition, the
Economy Acquisition and the Casa Ford Acquisition (each as defined below) that
are a part of the Pending Acquisitions are attached to this report on Form 8-K
as Exhibits 99.2, 99.3 and 99.4, respectively.
(I) THE HATFIELD ACQUISITION. The Company has entered into an Asset
Purchase Agreement dated as of February 4, 1998 (the "Hatfield Purchase
Agreement") between the Company, as buyer, Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., Trader Bud's Westside Dodge, Inc., Toyota West, Inc., and
Hatfield Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E. Hatfield and Dan
E. Hatfield, as trustee of The Bud C. Hatfield, Sr. Special Irrevocable Trust,
as shareholders of the sellers, as amended by Amendment No. 1 and Supplement to
Asset Purchase Agreement dated as of May 28, 1998 ("Amendment No. 1") by and
among the parties to the Hatfield Purchase Agreement (the "Hatfield
Acquisition"). The Hatfield Purchase Agreement and Amendment No. 1 are attached
to this report on Form 8-K as Exhibits 99.5 and 99.6, respectively. The Company
closed the Hatfield Acquisition on July 9, 1998 (the date of this filing),
except that the acquisition of the Toyota West dealership was closed in escrow
pending the approval of Toyota to the acquisition of this dealership.
Pursuant to the terms of the Hatfield Purchase Agreement, the Company
acquired substantially all of the assets and assumed certain liabilities of
six individual automobile dealerships located in Columbus, Ohio selling
Chrysler/Plymouth, Dodge, Hyundai, Isuzu, Jeep, KIA, Lincoln/Mercury, Subaru,
Toyota and Volkswagen brands of vehicles. The Company intends
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to continue the existing operations at each of the dealerships being acquired in
the Hatfield Acquisition. The Company has obtained consents from all of the
applicable manufacturers to the Hatfield Acquisition, except from Chrysler and
Toyota. The Company expects to obtain the consent of Chrysler in the near
future. The Company also expects to receive the consent of Toyota in the near
future, at which point the escrow of the Toyota West dealership will be
released. There can be no assurance that the consents of Chrysler and/or Toyota
will be obtained. Any manufacturer who does not consent to the Hatfield
Acquisition may seek to terminate its franchise agreement, although relevant
state franchising laws impose limitations on a manufacturer's ability to
terminate a franchise.
(II) THE MONTGOMERY ACQUISITION. The Company has also entered into an
Agreement and Plan of Merger dated as of February 10, 1998 (the "Montgomery
Purchase Agreement") among the Company, Frank E. McGough, Jr., Capitol
Chevrolet, Inc. and Capitol Imports, Ltd. (the "Montgomery Acquisition"). The
Montgomery Purchase Agreement is attached to this report on Form 8-K as Exhibit
99.7. Pursuant to the Montgomery Purchase Agreement, the Company will acquire
all the outstanding stock of two automobile dealerships operating Chevrolet,
KIA, Mitsubishi and Hyundai franchises, each of which is located in Montgomery,
Alabama. The Company intends to continue operating each of the acquired
automobile dealerships following consummation of the Montgomery Acquisition.
(III) THE ECONOMY HONDA ACQUISITION. The Company has also entered into
a Stock Purchase Agreement dated as of March 16, 1998 (the "Economy Honda
Purchase Agreement"), between the Company, Freeman Smith, Melvin Q. Smith, and
James M. Holland (the "Economy Acquisition"). The Economy Honda Purchase
Agreement is attached to this report on Form 8-K as Exhibit 99.8. Pursuant to
the Economy Honda Purchase Agreement, the Company will acquire all of the
outstanding capital stock of Economy Cars, Inc., which owns and operates a Honda
automobile dealership located in Chattanooga, Tennessee. The Company intends to
continue operating the Honda dealership following consummation of the Economy
Acquisition.
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(IV) THE CENTURY ACQUISITION. The Company has also entered into an
Asset Purchase Agreement dated April 10, 1998 (the "Century Purchase Agreement")
by and among the Company, Century Auto Sales, Inc., A. Foster McKissick, III and
Murray P. McKissick (the "Century Acquisition"). The Century Purchase Agreement
is attached to this report on Form 8-K as Exhibit 99.9. Pursuant to the Century
Purchase Agreement, the Company will acquire substantially all of the assets,
other than the real property and improvements thereon, and assume certain
liabilities of a BMW dealership in located in Greenville, South Carolina and a
satellite sales location in Spartanburg, South Carolina. The Company intends to
continue operating the BMW dealership and the satellite sales location
following consummation of the acquisition.
As part of the same acquisition, the Company has also entered into a
Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the
"Century Real Property Agreement") by and between the Company, Century Auto
Sales, Inc. and Fairway Investments, LLC. The Century Real Property Agreement is
attached to this report on Form 8-K as Exhibit 99.10. Pursuant to the Century
Real Property Agreement, the Company will purchase the Greenville and
Spartanburg real property upon which the BMW dealership and satellite sales
location are located. The aggregate purchase price for such real property will
be the appraised value of the two parcels, with a minimum price of $4.4 million
and a maximum price of $5.2 million.
(V) THE HERITAGE ACQUISITION. The Company has also entered into an
Asset Purchase Agreement dated April 10, 1998 (the "Heritage Purchase
Agreement") by and among the Company, Fairway Management Company d/b/a Heritage
Lincoln-Mercury-Jaguar, and Fairway Ford, Inc. (the "Heritage Acquisition"). The
Heritage Purchase Agreement is attached to this report on Form 8-K as Exhibit
99.11. Pursuant to the Heritage Purchase Agreement, the Company will acquire
substantially all of the assets and assume certain liabilities of a
Lincoln-Mercury-Jaguar dealership located in Greenville, South Carolina. The
Company intends to continue operating the Lincoln-Mercury-Jaguar dealership
following consummation of the Heritage Acquisition. The seller in the Heritage
Acquisition is affiliated with the seller in the Century Acquisition. Jaguar has
refused to approve the Company's acquisition of the Jaguar dealership in the
Heritage Acquisition. Consequently, the Company does not expect to be able to
acquire this Jaguar franchise, which would result in a purchase price adjustment
that has not yet been determined.
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As part of the same acquisition, the Company has also entered into a
Contract to Purchase and Sell Real Property dated as of April 10, 1998 (the
"Heritage Real Property Agreement") by and between the Company and Fairway Ford,
Inc. The Heritage Purchase Agreement is attached to this report on Form 8-K as
Exhibit 99.12. Pursuant to the Heritage Real Property Agreement, the Company
will purchase the real property upon which the Lincoln-Mercury-Jaguar dealership
is located. The purchase price for such real property will be its appraised
value and will be payable in cash at the closing.
(VI) THE CASA FORD ACQUISITION. The Company has also entered into a
Stock Purchase Agreement dated as of April 30, 1998 (the "Casa Ford Purchase
Agreement") by and among the Company, Aldo B. Paret and Casa Ford of Houston,
Inc. ("Casa Ford"). The Casa Ford Purchase Agreement is attached to this report
on Form 8-K as Exhibit 99.13. Pursuant to the terms of the Casa Ford Purchase
Agreement, the Company will acquire all of the outstanding capital stock of Casa
Ford, which owns and operates a Ford dealership located in the Houston, Texas
area (the "Casa Ford Acquisition"). The Company intends to continue operating
Casa Ford following consummation of the Casa Ford acquisition.
(VII) CONSENTS TO PENDING ACQUISITIONS. The Pending Acquisitions are
all expected to be consummated, subject to certain closing conditions, in the
third quarter of 1998, although there can be no assurance that any of the
Pending Acquisitions will be consummated. The Company has obtained manufacturer
consent to all of the Pending Acquisitions other than from BMW, Honda, Jaguar
and Mitsubishi. The Company currently expects to receive the remaining consents
prior to the closing of the relevant acquisitions, other than from Jaguar and
from BMW. There can be no assurance that such consents will be obtained. Any
manufacturer who does not consent to any Pending Acquisition may seek to
terminate its franchise agreement, although relevant state franchising laws
impose limitations on a manufacturer's ability to terminate a franchise.
The Company received a notice from BMW that it was exercising its right
of first refusal with regard to the dealerships that are a part of the Century
Acquisition pursuant to BMW's franchise agreement with the seller. However, the
Company believes that this right of first refusal is subject to another
agreement between BMW and the seller that required notice of BMW's intention to
exercise its right of first refusal within 30 days of BMW being notified of the
sale of the dealerships. BMW's notice was delivered to the Company after the
expiration of this 30 day time period. Consequently, the Company believes that
BMW failed to timely exercise its right of first refusal. The Company is
currently negotiating with BMW for its consent with respect to the Century
Acquisition, and the Company believes that it will be successful in entering
into a favorable arrangement with BMW.
(C) RECENT DEVELOPMENTS. The Company has entered into an Asset Purchase
Agreement dated as of July 7, 1998 (the "Higginbotham Purchase Agreement") by
and among the Company, HMC Finance Corporation, Inc., Halifax Ford-Mercury,
Inc., Higginbotham Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile, Inc.,
Sunrise Auto World, Inc. and Dennis D. Higginbotham (the "Higginbotham
Acquisition"). The Higginbotham Purchase Agreement is attached to this report on
Form 8-K as Exhibit 99.14. Pursuant to the Higginbotham Purchase Agreement, the
Company will acquire substantially all of the assets of three Daytona Beach,
Florida dealerships selling Acura, Chevrolet, Ford, Mercedes, Mercury and
Oldsmobile brands of vehicles, and related assets. The Company has not yet
sought to obtain manufacturer consents for the dealerships being acquired in the
Higginbotham Acquisition. The Company also anticipates purchasing the real
property on which the acquired dealerships are located pursuant to a separate
agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(c) EXHIBITS.
Exhibit Number Description
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99.1 Press Release dated July 9, 1998.
99.2 Combined Financial Statements of the Hatfield Automotive
Group as of December 31, 1996 and 1997 and for each of
the three years in the period ended December 31, 1997
(Audited) and as of March 31, 1998 and for the three
months then ended (Unaudited).
99.3 Financial Statements of Economy Cars, Inc. as of
December 31, 1997 and for the year then ended (Audited)
and as of March 31, 1998 and for the three months then
ended (Unaudited).
99.4 Financial Statements of Casa Ford of Houston, Inc. as of
December 31, 1997 and for the year then ended (Audited)
and as of March 31, 1998 and for the three months then
ended (Unaudited).
99.5* Asset Purchase Agreement dated as of February 4, 1998
between Sonic Automotive, Inc., as buyer, Hatfield Jeep
Eagle, Inc., Hatfield Lincoln Mercury, Inc., Trader
Bud's Westside Dodge, Inc., Toyota West, Inc., and
Hatfield
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Hyundai, Inc., as sellers, and Bud C. Hatfield, Dan E.
Hatfield and Dan E. Hatfield, as trustee of The Bud C.
Hatfield, Sr. Special Irrevocable Trust, as
shareholders of the sellers (incorporated by reference
to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 (the
"March 31, 1998 Form 10-Q")).
99.6 Amendment No. 1 and Supplement to Asset Purchase
Agreement dated as of May 28, 1998 by and among Sonic
Automotive, Inc., Hatfield Jeep Eagle, Inc., Hatfield
Lincoln Mercury, Inc., Westside Dodge, Inc., Toyota
West, Inc., Hatfield Hyundai, Inc., Bud C. Hatfield, Dan
E. Hatfield and Dan E. Hatfield as trustee of The Bud C.
Hatfield, Sr. Special Irrevocable Trust.
99.7* Agreement and Plan of Merger dated as of February 10,
1998 among Sonic Automotive, Inc., as buyer, and
Capitol Chevrolet, Inc., Capitol Imports, Ltd. and Frank
E. McGough, Jr., as sellers (incorporated by reference
to Exhibit 10.4 to the March 31, 1998 Form 10-Q).
99.8* Stock Purchase Agreement dated as of March 16, 1998
between Sonic Automotive, Inc., as buyer, and Freeman
Smith, as stockholder and the other stockholders named
therein (incorporated by reference to Exhibit 10.5 to
the March 31, 1998 Form 10-Q).
99.9 Asset Purchase Agreement dated April 10, 1998 by and
among Sonic Automotive, Inc., Century Auto Sales, Inc.,
and A. Foster McKissick, III and Murray P. McKissick.
99.10 Contract to Purchase and Sell Real Property dated as of
April 10, 1998 by and between the Company, Century
Auto Sales, Inc. and Fairway Investments, LLC.
99.11 Asset Purchase Agreement dated April 10, 1998 by and
among the Company, Fairway Management Company
d/b/a Heritage Lincoln-Mercury-Jaguar, and Fairway
Ford, Inc.
99.12 Contract to Purchase and Sell Real Property dated as of
April 10, 1998 by and between the Company and Fairway
Ford, Inc.
99.13 Stock Purchase Agreement dated as of April 30, 1998 by
and among the Company, Aldo B. Paret and Casa Ford of
Houston, Inc.
99.14 Asset Purchase Agreement dated as of July 7, 1998 by
and among the Company, HMC Finance Corporation,
Inc., Halifax Ford-Mercury, Inc., Higginbotham
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Automobiles, Inc., Higginbotham Chevrolet-Oldsmobile,
Inc., Sunrise Auto World, Inc. and Dennis D.
Higginbotham.
*Filed Previously
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SONIC AUTOMOTIVE, INC.
Date: July 9, 1998 By: /s/ Theodore M. Wright
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Theodore M. Wright
Chief Financial Officer, Vice
President-Finance, Treasurer,
Secretary and Director
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