Penske Motor Group. On November 19, 2025, we purchased all of the membership interests of Penske Motor Group, LLC and thereby acquired four franchised automotive dealerships: Longo Toyota and Longo Lexus located in El Monte, California, Lexus Stevens Creek located in Stevens Creek, California, and Longo Toyota of Prosper located in Prosper, Texas (collectively, the “Dealerships”).
This transaction was completed via a Membership Interests Purchase Agreement (the “Purchase Agreement”) by and among (i) GWOOD 2 LLC (“GWood”), (ii) Penske Automotive Holdings Corp. (“PAHC”), (iii) Douglas Eroh (collectively with GWood and PAHC, “Seller Owners”), (iv) PMG 1 Holdings, LLC (“Seller,” and together with Seller Owners, the “Seller Group”), (v) Penske Motor Group, LLC (“PMG”), (vi) D. Longo, LLC (“D. Longo”), (vii) El Monte Automotive Group, LLC (“EMAG”), (viii) S J Automotive, LLC (“SJA”), (ix) LTP Automotive, LLC (“LTPA”, and, collectively with D. Longo, EMAG and SJA, the “Operating Companies”; PMG and the Operating Companies are collectively referred to as the “Group Companies”) and (x) PAG TL1, LLC, our wholly owned subsidiary (“Buyer”). Seller, the holding company of PMG and the four Dealerships, is owned 5% by Mr. Eroh, 25.65% by PAHC, a wholly owned subsidiary of Penske Corporation (as further discussed below), and 69.35% by GWood, which is owned by an affiliate of Greg Penske (the Vice Chair of our Board) and the son of Roger S. Penske. The aggregate purchase price was $519,446,253 (the “Purchase Price”), including $47,696,253 for the net worth (tangible assets and liabilities) of PMG as of the closing date as finally determined in accordance with the Purchase Agreement. The Company paid $363,619,353 of the Purchase Price in cash, including a customary post-closing adjustment, and $155,826,900 pursuant to a 4.5% senior subordinated promissory note (the “Note”) issued by Buyer to Seller. The Note is unsecured and was issued on November 19, 2025 and has a three-year term (subject to Buyer’s right to prepay the Note in whole or in part at any time at its option without premium or penalty) and customary events of default. We also guaranteed Buyer’s obligations under the Note and the Purchase Agreement.
The Purchase Agreement contains customary representations and warranties made by each member of the Seller Group and Buyer. Buyer and the Seller Group have also agreed to various covenants in the Purchase Agreement, including customary non-solicitation and noncompetition covenants by Seller Group. Buyer and the Seller Group have agreed to indemnify one another against certain specified losses, subject to customary exceptions and limitations.
Our Board’s approval of this transaction was subject to the recommendation of a special committee of independent members of the Board, which reviewed and negotiated the terms of this transaction, retained its own legal and financial advisors, McGuireWoods LLP and Houlihan Lokey Capital, Inc., and which possessed the authority to reject the transactions contemplated by the Purchase Agreement. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which was filed as Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
The Group Companies own no real property and the Operating Companies each lease their premises and certain facilities under customary triple-net leases or subleases. Under certain of these leases (as further discussed below), GWood and certain affiliates of PAHC serve as the landlords or sublandlords of the Operating Companies. D. Longo leases its dealership premises from Penske Realty, Inc. (“Penske Realty”), a wholly owned subsidiary of Penske Corporation, pursuant to a lease expiring June 30, 2027, and D. Longo has three five-year options to extend the term of the lease. This lease requires a base rental payment of $245,000 per month (or $4,655,000 from December 1, 2025 through the remaining initial term). Upon the exercise of each renewal option, the monthly base rent will be adjusted based on any increase in the applicable consumer price index (the “CPI”) over a specified period, subject to a cap on any increase.
EMAG subleases its dealership premises from D. Longo, which in turn subleases the premises from Penske Realty, which ultimately leases the premises from an independent third party landlord, pursuant to a lease expiring June 30, 2027 (the “Prime Lease”). EMAG has three five-year options to extend the term of its sublease and correspondingly cause Penske Realty to extend the term of the Prime Lease. The third party landlord is owed a base rental payment of $246,786 per month (or $4,688,592 from December 1, 2025 through the remaining initial term). Upon the exercise of each renewal term of the Prime Lease and corresponding renewal of EMAG’s sublease, EMAG’s monthly base rental obligations will be adjusted based on any increase in the applicable CPI over a specified period, subject to a cap on any increase.
SJA leases its primary dealership premises from GWood pursuant to a lease expiring July 8, 2034, and SJA has two five-year options to extend the term of the lease. This lease requires a base rental payment of $174,088 per month, subject to an increase on July 1, 2029 based on any increase in the applicable CPI over a specified period, subject to a cap on any increase. Assuming no CPI increases, this lease would require base rental payments of approximately $17,971,000 from December 1, 2025 through the remaining initial term. Upon the exercise of the first renewal option only, the monthly rent shall be adjusted to the then fair market value of the land and improvements, subject to a specified cap, for the duration of both option periods.
