Dalton Corp., a large Mexican company with businesses in several industries including auto retail, entered the U.S. dealership market in November with the purchase of two California stores after searching for years for the right fit. And it wants to add more north of the Mexican border.
Dalton, of Guadalajara in western Mexico, on Nov. 29 bought Frank Toyota and Frank Subaru, both in National City, near San Diego, from longtime owners Ron Fornaca and Gary Fenelli.
Entry into U.S. dealership ownership is rare for auto retailers based in Mexico, dealership buy-sell brokers say, as most cross-border transactions have involved Canadian buyers broadening their holdings in the U.S.
“It was a process for us,” Juan Carlos Rodriguez-Villava, COO of Dalton Motors, a division of Dalton Corp., told Automotive News. “It took around seven to eight years. By the time we were ready, which was probably a little before last year, we decided to start exploring. And we did so and we said we needed to focus on what we do well and with the OEMs that we know that we work well [with].”
The company, which started out as a manufacturer of jeans in 1945, is not new to automotive retail. In 1987, Rodriguez-Villava said, Dalton entered the motorcycle retail business with Honda and later opened its first automotive dealership, also with Honda, in 1995.
Today, Dalton has about 29 franchised dealerships between its automotive and motorcycle brands spread across Mexico City, Guadalajara, San Luis Potosi and now California, Rodriguez-Villava said. It also has a half dozen used-vehicle-only stores in Mexico.
Dalton’s portfolio of brands in Mexico includes Honda, Hyundai, Kia and Toyota. It also offers vehicle brands sold in Mexico and other markets but not in the U.S., including Volkswagen Group’s Seat and Chirey and BYD from China.
Dalton comprises five divisions: automotive, real estate, financial, innovation and its foundation, Rodriguez-Villava said, and is led by Salomon Chidan, president and chairman.
The California dealerships were renamed Dalton Toyota and Dalton Subaru. Subaru is a new brand for the group. The transaction also included an auto parts wholesaling business in National City.
Bert Rasmussen, a shareholder of the Scali Rasmussen law firm in Los Angeles, which provided legal counsel to Dalton in the transaction, said the cross-border aspect of the deal added a layer of complexity.
“Being the first new-car dealer operation for Dalton in the U.S., they had to kind of start from square one in terms of getting their dealer licenses, business licenses and tax ID numbers and new entities set up,” Rasmussen said. “That was all part of the process.”
Fornaca and Fenelli still own Frank Hyundai, also in National City. Fenelli said he no longer has an ownership stake in the Toyota or Subaru stores, but stayed on with Dalton as platform manager.
The Toyota dealership dates back to 1965, Fenelli said, while the Subaru store was acquired around 12 years ago.
“We had a lot of offers to the table before Dalton got to the table,” Fenelli said. “And quite frankly, we knew what we wanted and what we didn’t want. As a family-run and operated business, we were obviously concerned about the transition, making sure that we found a company that would be the right fit, right core values.”
Rodriguez-Villava declined to say whether Dalton has additional U.S. dealerships under contract to purchase, but said the group is looking at other opportunities.
“We are already looking to grow,” he said. “Obviously, we’re going to have to tune in how we cater to the market and the competitive advantages that we’re working on with Gary and the great executive team that we have [with] the Dalton platform in San Diego. This is only our first step and we’re going to continue to grow.”
Rodriguez-Villava said Dalton is not bound only to California. The group is looking at other parts of the U.S., he said, though he didn’t provide specifics.
While it has become increasingly more common the past few years for Canadian dealership groups and individuals to buy U.S. dealerships, it’s unclear how many U.S. dealerships are currently owned by Mexican dealers and auto retailers.
Jason Stopnitzky, co-founder of Performance Brokerage Services Inc., an Irvine, Calif., buy-sell firm, who along with the firm’s Jonathan Forgy handled the National City transaction, said his company has completed a deal with a Mexican group buying a U.S. dealership only one other time.
Stopnitzky said his firm worked with Manuel Garrido, CEO of Grupo Autocom, a prominent auto retailing group in Mexico, when Garrido bought a handful of Nissan dealerships in the U.S., including closing a transaction for a Nissan store in San Leandro, Calif., in 2014.
Jose Muñoz, Nissan’s former chairman for North America, in the mid-2010s partnered with Mexican auto retailers to help them own U.S. dealerships in markets in California in a bid to push for more U.S. market share.
It’s unclear if Garrido’s group still owns U.S. stores; there are no U.S. locations listed on Grupo Autocom’s website.
Stopnitzky, who said he is not working on any transactions involving Mexican-based companies, said he has fielded several inquiries from such companies looking to acquire U.S. dealerships over the past six months. A couple of those inquiries came after the Dalton transaction closed, he said.
“When you have those trendsetters come in, it seems like some follow,” Stopnitzky said.
Michael Whitton and Ben Gourley of the Troutman Pepper law firm were legal counsel to the sellers in the transaction.