On Tuesday, COX Automotive, who own Manheim, Motors.co.uk and NextGear Capital announced its acquisition of Dealertrack Technologies Inc. for $4 billion to expand the new and used-car dealerships in USA.
The deal’s cash offer of $63.25 per share announced in the statement on Monday, is a 59% premium to the Friday’s close price per share. The stock was trading at a record of $62.74. The deal between the companies is expected to close in the third quarter. Based on the total number of shares outstanding and options and warrants issued by the company since last May, the equity value of the deal is $4 billion. In the equity value, the company has considered the shares underlying the convertible debt.
DealerTrack is a startup that deals with high-value web-based software solutions and services and works with majority of segments in the automotive industry that includes dealer, lenders, vehicle manufacturers, third-party retailers, agents, middlemen and after-market providers. Apart from connecting the dealers with the vendors, Dealertrack delivers Dealer Management Systems (DMS), inventory, sales and F&I, digital marketing and registration and titling solutions.
Cox Automotive is one among the top provider of vehicle remarketing services and digital marketing and software solutions. It is headquartered in Atlanta and employs more than 24,000 employees and operates in more than 150 locations worldwide.
Cox Automotive strongly believes that this acquisition would widen the way to deliver greater value to consumers, dealers, lenders, manufacturers and the overall automotive industry. President of Cox Automotive, Sandy Schwartz said, “This is a great investment in our customers and in the auto industry. We have long admired the Dealertrack team and its highly respected brands. Integrating our platforms will be a big step forward in our shared vision of provising open, cost-effective and efficient solutions for dealers, lenders, manufacturers and consumers.”
Sajeev Varma, managing director of Teneo Capital said, “Cox Automotive’s strategy is to move toward the new-car sales side. They are already the biggest in the business on the used-car side and now they are trying to broaden it to the new-car side.” Analyst of Stifel Nicolaus Gur Talpaz said, “The deal will place the Cox’s Automotive at the top of the automotive inventory management software market. I think the premium is warranted, given the strategic value that DealerTrack offers to Cox.” He also added, “It really gives you a very clear leg up versus your competitors. So it is a good move.”
The funding for the deal is through an existing bank facility, a new $1.85 billion bank term loan arranged by Citigroup Global Markets Inc and a $750 million common equity investment from BDT Capital Partners, according to the statement. The financial advisers of Cox Automotive are BDT & Co. and Citigroup Global Markets and for legal advisors its, Wachtell, Lipton, Rosen & Katlz. Evercore is serving as financial adviser to Dealertrack, with O’Melveny & Myers LLP serving as legal adviser.