Crown Group Buys Rogers-Based Car-Mart Chain

Things won’t change much when Crown Group Inc. of Dallas takes over Rogers-based Car-Mart in January.

Car-Mart, with $52 million in annual revenue, has a reputation in northwest Arkansas for accepting almost anything in trade for a vehicle. The list of trade-ins has included cows, horses, ostriches, pigs, bird dogs, a llama and even a python.

“Anything that has value to it, we’ll take it,” says Hank Henderson, Car-Mart’s assistant CEO. “That’s a standard rule we have. Pretty much anything you can think of we’ve traded for. We’ll trade for cars that aren’t running. We’ll go get them.”

Edward R. McMurphy, president and CEO of Crown, says things are going to stay the same after Crown’s purchase of Car-Mart is completed in January.

“All of the employees will remain employees of Car-Mart,” says McMurphy. “Car-Mart will remain a wholly owned subsidiary of Crown. There’ll be no change in the way it does business, and there’ll be no change in management.”

Car-Mart currently has about 200 employees on 30 car lots in Arkansas, Texas, Oklahoma and Missouri.

Crown, a diversified buyout firm, announced on Dec. 2 that it had agreed to purchase Car-Mart for $41 million ($33.5 million in cash and $7.5 million in a five-year seller note). The cash portion of the purchase will be funded from a senior debt facility and cash to be provided by Crown.

Car-Mart underwrites, finances and services retail installment contracts generated by its dealerships. The company currently has more than 15,000 retail installment contracts, representing about $46 million in net accounts receivables.

Crown expects the acquisition to increase the company’s earnings per share by about 40 cents in the first 12 months following the closing of the transaction.

“We are excited about this transaction,” McMurphy says. “We’re very enthusiastic about getting this transaction closed.

“Car-Mart should complement our Paaco Automotive Group subsidiary, and we look forward to the sharing of ideas, which should benefit both companies. Car-Mart has developed a strong brand identity with customers in non-urban communities, whereas Paaco has focused upon Hispanic customers in metropolitan markets. Upon completion of this transaction, Crown’s annualized revenues from its automotive subsidiaries should exceed $130 million.”

The acquisition of Car-Mart increased Crown’s assets by 37 percent to $156 million. The acquisition will mean even more to revenues at Crown. Revenues were about $90 million per year at Crown before the purchase of Car-Mart.

Crown is a publicly traded firm that was founded in 1983 as a cable television business serving some 25,000 apartment dwellers in Dallas and Houston. McMurphy, who was CEO of the company then, became president in 1984 and has remained in the dual role ever since. Crown, which went public in 1986, was based in Mobile, Ala., until moving to Dallas in 1988.

Crown, previously known as Crown Casino Corp., changed its name in 1997. In the early 1980s, Crown developed and operated Isle of Capri, a casino in Lake Charles, La. McMurphy says the company decided to become a buyout firm after selling that Lake Charles casino. But the company now owns 49 percent of Casino Magic Neuquen, which has two casinos in Neuquen Province, Argentina.

In addition, Crown currently owns 65 percent of Paaco Automotive Group, a vertically integrated used car sales and finance company; 100 percent of Precision IBC, a firm specializing in the sale and rental of intermediate bulk containers; 80 percent of Concorde Acceptance Corp., a sub-prime mortgage lender; and 80 percent of Home Stay Lodges, a partnership that is involved in the development and operation of extended-stay lodging facilities.

McMurphy says he was contacted about the sale by the Llama Co. of Fayetteville, which was representing Car-Mart. Crown hired the Little Rock investment firm of Stephens Inc. as its representative in the negotiations.

Car-Mart has sold more than 150,000 cars since it opened its first lot, says Henderson.

Car-Mart sells basic vehicles that are less than nine years old, “nothing fancy,” says Henderson.

And Car-Mart tries to avoid the reputation that usually taints most used car lots. The company doesn’t hire employees who have previous car sales experience.

In fact, most of the time, the person helping customers on a Car-Mart lot isn’t a salesman at all. The apparent salesman is more likely to be a manager in training.

“We don’t really have salespeople,” Henderson says. “It’s a little bit different mentality.”

Car-Mart sponsors an annual contest in which the customer who brings in the most unusual trade, and the salesman who swaps for it, both win weekend trips to Branson, Mo.

Car-Mart lots vary considerably in size. Some contain only eight or 10 cars. Others may have as many as 75 in stock. Most Car-Mart lots turn over the entire inventory twice in a month, he says.

Car-Mart offers a four-month, 4,000-mile service contract that covers repairs on the cars the company sells. t n