NEW YORK (TheStreet) -- Lithia Motors (LAD) stock is gaining Monday after announcing it has entered into a definitive agreement to purchase DCH Auto Group for $362.5 million, $340 million in cash and $22.5 million, or around 300,000 shares, of Lithia common stock. By midday, shares had added 13.6% to $87.11.
Upon closing, DCH's 27 stores will combine with Lithia's 101 stores. The DCH stores are expected to generate $2.3 billion in annualized revenue and contribute 65 cents to 75 cents a share in earnings per year. The offer is expected to close in the fourth quarter, subject to customary closing conditions.
"For the past several years, we have been seeking a strategic partner to help us to enter the Eastern United States. The DCH organization is an ideal fit with our existing team," explains CEO Bryan DeBoer in a statement.
Separately, TheStreet Ratings team rates LITHIA MOTORS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate LITHIA MOTORS INC (LAD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, reasonable valuation levels and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."