The recent capital raising attracted an additional 18 investors into the CarsGuide network of dealers with the total number of dealer shareholders rising to 60.
These dealer investors sell the majority of the brands on the Australian market and have a strong national footprint of 600 dealerships.
The capital raising was necessary to buy out the almost 50 per cent shareholding held in the website by News Corp as that company exits in preparation for the merging of the CarsGuide business into the Australian automotive assets owned by Cox Automotive.
The expanded group of dealer investors are housed within a new company, DealerMotive.
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Subject to shareholder approval in a vote to be held on December 2, News Corp will be paid $15 million for its shares in One Way Traffic, which trades as CarsGuide, and another $5 million will be paid for an advertising agreement that will promote CarsGuide in News Corp’s websites. This is paid advertising, not a contra deal.
This brings the total dealer commitment to creating a strong competitor to the dominant Carsales to a little more than $35 million.
In the initial joint venture with News Corp the dealers invested $15 million and News Corp’s contribution was the CarsGuide website business and online and print contra advertising. Several hundred thousand dollars more were committed by dealers in a minor subsequent capital raising.
The automotive retail powerhouse that dealers are expecting to emerge on the completion of the exit by News Corp from the CarsGuide business, will be the combination of CarsGuide and Cox Automotive’s Australian assets – the Manheim auction group, the recently-purchased Dealer Solutions and Manheim’s online assets including SellMyCar.com.au – merged into a new entity, Cox Automotive Australia (CAA).
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After the merger the dealer investors through DealerMotive will own 30 per cent of CAA and Cox Automotive in the US will own 70 per cent.
The US-based Cox Automotive is the world’s biggest automotive services company and is part of Cox Enterprises a family-owned media and communications company which has revenues of $US18 billion ($A23.4 billion).
Cox Automotive services 90 nations worldwide and for some time has been assembling a “house of brands” so it can offer services and technologies across the entire scope of dealership management and operations in a way it believes it can “revolutionise” the way dealers do business and thus transform the way Australians buy, sell and own vehicles.
Once the merger is complete there are plans to incorporate Xtime, an owner loyalty system, into CAA.
An information memorandum sent to dealers in September said there was potential for other Cox brands to be brought into CAA over time but it pointed out that no guarantee was being offered to investors that the other brands would be included in CAA.
The chairman of CarsGuide.com.au, Greg Duncan, one of the three major initial shareholders in One Way Traffic, told GoAutoNews Premium: “The future of Cox Automotive Australia is just so exciting and unlimited.
“Being a Mini-Me to Carsales was just not going to work. With the resources we really needed to take Carsales on we needed to do something really significant,” he said.
The import of the deal has caught the eye of David Blackhall, CEO of the Australian Automotive Dealer Association, who said: “By investing in this new company, dealers have demonstrated their commitment to the benefits that flow from increased competition.
“The combined resources, infrastructure and technology of Cox Automotive Australia and its parent company offer dealers a new world-class choice of service providers across all aspects of their automotive retailing, wholesaling, advertising and servicing needs,” he said.
“And of course, consumers will be the ultimate beneficiaries.”
Disclosure: Cox Automotive has a minority interest in GoAutoMedia Pty Ltd.
By John Mellor
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