Warren Buffett says his Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has officially entered the auto industry, completing the trifecta of planes, trains and automobiles. His massive conglomerate struck a deal to buy the fifth-largest auto dealer in the country; Van Tuyl Group.
Buffett’s planes, trains and automobiles
The Phoenix, Ariz.-based auto dealer group joins Buffett’s Burlington Northern Santa Fe rail company and his private plane company Net Jets. The billionaire investor also holds a significant stake in China’s BYD, which is perhaps best-known for its electric buses although it does make some cars and other products as well. However, his firm does not own the entire company, like it will with Van Tuyl.
Today on CNBC‘s Squawk Box, Warren Buffett announced that Van Tuyl Group will be renamed Berkshire Hathaway Automotive. Larry Van Tuyl will be the subsidiary’s chairman. Jeff Rachor, another executive at Van Tuyl Group, will become the company’s CEO. In addition to the announcement on CNBC, there’s also a press release about the acquisition.
Buffett sees consolidation opportunities
The Van Tuyl family has spent the last 62 years snapping up stakes in auto dealerships. The company is the fifth-largest auto dealership owner in the U.S. and the largest privately-held dealership operator.
Van Tuyl has 78 independently owned dealerships, most of which are located in the Midwest and the Southwest. The company’s dealerships sell a broad array of car brands, including Chevrolet, Cadillac, Toyota and BMW.
Van Tuyl is a massive auto play
The auto dealership operator had about $9 billion in revenue last year, and Buffett sees opportunities to scale the business up. Buffett plans to use the acquisition to purchase other auto dealerships. He did not say how much Berkshire Hathaway paid for the acquisition, although he did say that they paid cash for it.
The billionaire said that if it stood on its own, Van Tuyl would be on the Fortune 500. Berkshire Hathaway owns 9.5 companies that would be in the Fortune 500 if they stood alone. He expects the deal to close in the first quarter of 2015, assuming it receives approvals from regulators and major automakers.