Special Report: Did CarMax Just Make a Berkshire Hathaway Automotive Acquisition More Likely?

(BRK.A), (BRK.B)

CarMax, the no haggle, used car retailer with 150+ locations nationwide,
has greatly increased its presence in Boston. The move creates competitive pressures for all of Boston’s car dealers and brings up a big question.

Is it now likely that the Herb Chambers group of auto dealerships will become part of Berkshire Hathaway Automotive (BHA)?

Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, looks to be the perfect fit for BHA, and its owner could be ready to sell. Herb Chambers could be all the more ready now that CarMax has expanded from a single outlet in the town of North Attleboro, Massachusetts, to adding two new outlets in the towns of Norwood and Danvers.

The Norwood store features 40,000 square-feet of showroom and service area, and the Danvers store features 20,000 square-feet of showroom and service area.

And There’s More Coming to Boston

A CarMax a little further west in the town of Westborough is scheduled to open in the summer of 2016, so the competition will only continue ratcheting up in the greater Boston area.

CarMax is not just another dealership group. It has muscle. It’s  a national used car power house that’s grown to be a member of the FORTUNE 500 and the S&P 500.

According to the company, during the 12 months ending February 28, 2014, nationally CarMax retailed 526,929 used cars and sold 342,576 wholesale vehicles at in-store auctions.

Who is Herb Chambers?

Herb Chambers is a former copier salesman who has spent the past thirty years building a top dealership group that is the 12th largest privately-held auto group in the nation.

Would he sell?

Chambers has already stated that he would sell if the price is right, and he tips his hat to Warren Buffett’s $4.1 billion Van Tuyl Group acquisition for boosting his personal net worth to some $1.5 billion, as valuations jumped throughout the whole sector.

Auto sales are currently at record levels and private equity money, including financier George Soros, has been looking to get in.

Opening the Door to Berkshire

Over the years, Chambers has turned down offers from AutoNation Inc. and Penske Automotive Group. Now, with valuations high for auto groups, there may be no better time to cash out.

Like Buffett, Chambers is a Shrewd Guy

Herb Chambers is certainly not afraid to sell when the time is right. Three decades ago he founded A-Copy America, and after merging it with Ikon Office Solutions, he cashed out with a big sale to Ricoh. It was a shrewd move, and Chambers has proved to be a shrewd guy who currently sells more cars than anyone else in New England.

Now, with competition heating up in the Boston market, the perfect exit strategy for Herb Chambers this time could involve Berkshire. After all, Warren Buffett’s already let be known that his goal is to make BHA much bigger.

Buffett wrote in his 2015 Berkshire Hathaway Chairman’s Letter that “…if we can buy dealerships at sensible prices – we will build a business that before long will be multiples the size of Van Tuyl’s $9 billion of sales.”

A deal with Herb Chambers could be just the way to do it.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.