Carsales managing director and CEO Cameron McIntyre said the 49 per cent acquisition was “an important milestone” in his company’s expansion and would “support long-term growth”.
“This acquisition is expected to accelerate our international growth strategy by providing us with exposure to a significant market in the US across attractive non-automotive verticals,” he said in a statement to GoAutoNews Premium.
But $800m is a lot of money for a website platform which, while offering commercial trucks and motorcycles, also operates in the more fringe side of the classifieds business including heavy equipment, personal watercraft, snow mobiles, ATVs and light aircraft.
What Trader Interactive does not have is car classifieds which is Carsales’ absolute expertise that it has not only honed to a sharp edge in Australia, but also within the sites it owns in South Korea (Encar), Brazil (Webmotors), Mexico (Soloautos), Chile (Chileautos) and Argentina (Demotores).
Trader Interactive also has a commercial web services division which provides website and online marketing to dealers in the equipment, commercial truck and agricultural industries.
Dealer web services in the car industry are another of Carsales’ strengths.
Trader Interactive covers marketplace services that are similar to Carsales including private listings, brand advertising, dealer services and data insights.
It has more than 8500 dealers and 49 OEM relationships, one million online listings and an average of about 13 million monthly unique visitors (in 2020) and has more than 380 employees.
Trader Interactive threw off adjusted revenue of $US123m ($A158m) in the 2020 calendar year and EBITDA was $US61m ($A78.6m). That is 44 per cent of revenue.
It claims a track record of delivering earnings growth of 13 per cent over the past five years.
That is a very strong base from which to stake a claim in the US car and pick-up classifieds market; possibly by starting in a major state like California or Texas.
Mr McIntyre said the US company offered Carsales “the opportunity to grow and diversify by geography and industry and can leverage Carsales’ experience in vertical marketplaces, its international technology platform and its track record of delivering increased dealer penetration in large markets”.
Reading between the lines, the move is such a bold commitment for Carsales that there has to be something more than business as usual within the acquisition with cars and pick-ups being the obvious gap.
The purchase values Trader Interactive at $US1.625 billion ($A2.09b). Carsales has a call option to acquire the remaining 51 per cent of shares from existing owners Goldman Sachs, Eurozeo and management and employees. Carsales’ current market capitalisation is $A4.88b.
The purchase was funded by debt and equity. Carsales is now in the process of raising $A600m to cover the acquisition through a fully underwritten 1-for-6.99 pro-rata accelerated renounceable entitlement offer which will involve the company issuing about 35.3 million new ordinary shares. The balance will be funded by raising debt through its current lenders.
Trader Interactive was founded in 2010 in Norfolk, Virginia.
By John Mellor and Neil Dowling