Privately-owned Cazoo, which has an online used-car business covering the UK and parts of Europe, said this week it will become a public company through a $US7 billion ($A9.1 billion) merger with US special purpose acquisition company (SPAC) AJAX I.
SPACs are shell companies that are created with the sole purpose of raising funds to acquire an existing private company, so that the target firm can bypass the traditional IPO process.
In the US, SPACs have raised $US87.9b ($A115b) so far this calendar year, exceeding the total figure of all of 2020. They are increasingly common in the US but barely exist in Europe.
Online automotive sales account for a tiny slice of the global car market but are following the pattern of Amazon and thriving in a COVID-19 environment.
Cazoo had an annualised revenue in the first quarter of this year of more than $US600 million ($A784 million) and expects sales of close to $US1b ($A1.3b) in this calendar year, four times that of the previous year.
In a statement, it estimated Europe’s used-car market at $US700b ($A914b), with just two per cent of sales taking place online.
In the US, the similar used-car business of Carvana has had a five-fold increase in its share price over the past 12 months and has picked up the title of the “Amazon of cars.”
Cazoo is expected to raise $US1.6b ($A2.1b) from the deal with AJAX I, including $US805m ($A1.05b) in a cash trust from the SPAC and a further $US800m ($A1.04b) from private investors. Combining the assets of AJAX I and Cazoo, the new entity is valued at about $US7b ($A9.1b).
Private investors are being led by AJAX’s sponsors and D1 Capital Partners, with additional backing from Altimeter, funds managed by BlackRock, Morgan Stanley’s Counterpoint Global fund, Fidelity and Abu Dhabi sovereign wealth fund Mubadala.
Once the deal is done, Cazoo will be traded publicly on the New York Stock Exchange.
Cazoo was founded in 2018 by Alex Chesterman, who will remain in the top position of the new entity. Billionaire US investor Dan Och, who owns AJAX I, will join the Cazoo board.
“This announcement is another major milestone in our continued drive to transform the way people buy cars across Europe,” Mr Chesterman said in a statement.
“We have created the most comprehensive and fully integrated offering in the largest retail sector which currently has very low digital penetration.”
By Neil Dowling