Carsales (ASX:CAR) halts trade on acquisition and $1.2b entitlement offer

• Carsales.com (CAR) is set to acquire the remaining 51 per cent interest in Trader Interactive for US$809 million (A$1.17 billion)
• As such, it has launched a $1.2 billion equity raising comprising of a fully underwritten entitlement offer for both institutional and retail investors
• The billion-dollar stock will also concurrently seek to upsize its debt facilities from $900 million to $1.4 billion to replace the existing $562 million debt facility at Trader Interactive
• Carsales MD and CEO Cameron McIntyre says the acquisition is a “natural evolution” of the company’s international growth strategy into large and attractive market
• Shares in Carsales last traded at $20.76 as of June 24

Carsales.com (CAR) has halted trading as a result of its decision to acquire the remaining 51 per cent interest in Trader Interactive for US$809 million (A$1.17 billion).

As such, the online automotive marketplace company has launched a $1.2 billion equity raising, comprising of a fully underwritten one-for-4.16 pro-rata accelerated non-renounceable entitlement offer for both institutional and retail investors.

The company will also concurrently seek to upsize its debt facilities from $900 million to $1.4 billion to replace the existing $562 million debt facility at Trader Interactive.

The offer will be conducted at $17.75 per new share, representing a 14.5 per cent discount to the last closing price on June 24 and will rank equally with existing shares.

The institutional entitlement offer closes on June 28 and the retail entitlement offer opens July 1 and will close on July 13.

Founded in 2010, Trader Interactive is an integrated platform of branded marketplaces in the US which provides digital marketing solutions and services across commercial truck, RV, powersports, and equipment industries.

According to Carsales, the acquisition represents a strategically compelling transaction for the company and its shareholders.

Carsales Managing Director and CEO Cameron McIntyre said the acquisition is a “natural evolution” of the company’s international growth strategy into large and attractive markets.

“We have demonstrated an excellent track record of delivering strong shareholder value by diversifying in international markets.

“Moving to 100 per cent ownership will enable shareholders to capture the significant upside potential in that business.

“The acquisition is expected to generate attractive financial returns for shareholders with low double-digit EPS accretion in year one.”

Key strategic highlights include market leading positions in attractive US non-automotive verticals which are 16 times as large as the Australian non-automotive market, favourable structural trends through increasing participation in the RV and Powersports industries and significant future growth potential and expected synergies under 100 per cent carsales ownership.

The company said its business continues to perform strongly, estimated to deliver a 16 per cent growth in FY22 revenue, reflecting the “continued strength” of its Australian and international businesses.

“Domestic business performance in the first five calendar months reflects continued healthy levels of demand in the Australian automotive and non-automotive markets as well as increased adoption in key growth products,” the company reported in its statement.

The acquisition is subject to conditions, which are expected to be satisfied late in the September quarter.

Shares in Carsales last traded at $20.76 as of June 24.