Crown Group Increases Its Stake In PAACO Automotive Group To 65%
5 August 1998
Crown Group Increases Its Stake In PAACO Automotive Group To 65%
DALLAS--Aug. 5, 1998--Crown Group, Inc. today announced that it has completed the acquisition of an additional 12% equity interest from the founders and management of PAACO Automotive Group, Inc. ("PAACO") for 375,000 shares of Crown common stock (valued at $4.00 per share). Following the completion of this transaction, Crown now owns 65% of PAACO. The minority shareholders may receive additional Crown shares under an earn-out agreement, if certain pretax earnings targets are achieved by PAACO during the twelve-month period ending January 31, 1999.
Headquartered in Irving, Texas, PAACO currently operates seven used car dealerships in the Dallas-Ft. Worth area. The dealerships cater primarily to an Hispanic clientele and provide installment financing for over 95% of the automobiles which are purchased by customers. The vertically integrated company assures the quality of cars sold by its dealerships through the adherence to strict purchasing criteria, and by thoroughly reconditioning automobiles at its centralized facility in Dallas prior to sale. PAACO's 1997 sales approximated $49 million, and management currently expects sales to exceed $60 million in 1998.
"We have been pleased with PAACO's operating performance since our initial acquisition of a 53% equity interest in that subsidiary in February 1998, and we are excited about management's plans for increasing PAACO's share of the `dealer-financed' segment of the used car retailing industry," commented Edward R. McMurphy, President and Chief Executive Officer of The Crown Group. "PAACO has identified a unique niche within the used car industry and has developed a leadership position within that niche in the Dallas-Ft. Worth area. By selling quality, fully reconditioned used cars, backed with warranties and follow-up service, PAACO enjoys a high level of repeat and referral business."
"We believe that PAACO can grow significantly by expanding into additional cities during the next several years, and Crown shareholders should participate more directly in this growth through our expanded equity ownership. PAACO has just completed another record quarter in both numbers of vehicles sold and gross revenues. The acquisition of an additional 12% equity interest in PAACO should have a positive impact upon Crown's earnings per share during the current fiscal year."
"Our working relationship with The Crown Group has been excellent, and we view our increased stock ownership as the most effective way to participate in the overall success of Crown in the future," observed Larry Lange, Chairman of PAACO Automotive Group, Inc. "The capital provided by Crown should allow us to accelerate our expansion program within the Hispanic niche of the used car retailing market. We expect to add another used car dealership in the Dallas area later this year, and we have identified Houston as the next market we are likely to enter."
The Crown Group seeks to enhance shareholder value through the acquisition, development, and operation of small-cap companies with significant growth potential. Such companies can benefit from Crown's financial and management expertise. The achievement of Crown's investment objectives may involve initial public offerings, mergers, spinoff transactions or sales to strategic partners. The Company's common stock is traded on Nasdaq under the symbol "CNGR".
This press release may include statements that constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, changing economic conditions, interest rate trends, continued acceptance of the Company's products and services in the marketplace, competitive factors, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
For further information, please contact Edward R. McMurphy at 972/717-3423 or R. Jerry Falkner, CFA, Investor Relations Counsel at 800/377-9893.