CARMEL, Ind., Feb. 24, 2022 /PRNewswire/ -- KAR Auction
Services, Inc., d/b/a/ KAR Global (NYSE: KAR), a leading digital
marketplace platform for wholesale used vehicles, has reached a
definitive agreement pursuant to which Carvana will acquire the
company's ADESA U.S. physical auction business. The all-cash
transaction is valued at $2.2 billion
and includes all auction sales, operations and staff at 56 ADESA
U.S. vehicle logistics centers and exclusive use of the ADESA.com
marketplace in the U.S. The agreement is closely aligned with KAR's
digital strategy, and will allow KAR to focus on its portfolio of
industry-leading digital marketplaces. Proceeds of the transaction
will be utilized to reduce KAR's corporate debt.
"KAR has always been a leader in the digital transformation of
remarketing, and this transaction firmly positions us as the
premier digital marketplace provider for wholesale used vehicles,"
said Peter Kelly, CEO of KAR Global.
"While off-premise sales have increased over the past decade and
represent over 50% of our vehicle sales today, we believe we are
still in the early stages of this industry evolution, and the
trends are rapidly gaining momentum. Digital marketplaces provide
low cost, highly efficient venues for our sellers and buyers to
transact, and our leading digital brands, platforms and technology
position us well to grow as digital penetration increases. This
transaction will allow us to focus our investments and energy on
those higher growth, higher margin digital marketplaces and on
delivering the most strategic solutions to our customers. By
simplifying our business, we are better positioned to lead and win
in the fastest growing segments of this industry."
Under the agreement, KAR will serve as a technology partner to
Carvana, supporting the ADESA.com digital marketplace and the
Simulcast and Simulcast+ technology that powers in-lane virtual
sales for ADESA and the majority of independent auctions today. KAR
will continue to operate its OPENLANE platform that supports more
than 40 private label programs representing approximately 80% of
North America's off-lease
inventory. KAR will also continue operating its rapidly growing
digital dealer-to-dealer businesses — BacklotCars and CARWAVE in
the U.S. and TradeRev in Canada —
all of which experienced double-digit growth in 2021. In addition,
the company will retain its ADESA Canada, ADESA U.K. and ADESA
Europe businesses as well as its affiliated inspections,
transportation and other services brands, including leading
floorplan solutions provider AFC.
"This transaction will enable a leaner, more nimble operating
model and faster long-term growth rate at KAR," said Kelly. "We
believe the transaction will reduce our 2022 Adjusted EBITDA by
approximately $100 million on an
annual basis — net of the contribution from the commercial
agreement entered into with Carvana as part of this transaction.
However, we will reduce our headcount by approximately 50% while
also paying down the majority of our balance sheet debt. We expect
these savings, when combined with our investments and our focus on
higher growth platforms, will deliver higher revenue and Adjusted
EBITDA growth rates, as well as higher gross profit and Adjusted
EBITDA margins."
Approximately 4,500 current ADESA and KAR employees will
transition to Carvana at the closing of the transaction. This will
include all field personnel supporting the ADESA U.S. vehicle
logistics centers as well as corporate employees and select senior
and executive leaders who are primarily focused on the ADESA U.S.
physical auction business.
The transaction is subject to customary closing conditions, and
is expected to close in the second quarter of 2022, with the 30-day
waiting period under the HSR Act having expired on February 23, 2022. The transaction has been
approved by the boards of directors of both KAR and Carvana.
Conference Call Information:
An investor and analyst conference call and webcast has been
scheduled for February 25, 2022 at
8:30 a.m. EST. The call will be
available via live webcast on the investor relations page of
www.karglobal.com and will be available for playback after the
call. To access the call via phone, please dial (844) 778-4145 and
enter pass code 3296093 at least 10 minutes prior to the call.
Advisors
Goldman Sachs & Co. LLC is serving as financial advisor and
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal
advisor to KAR.
Media
Inquiries:
|
Analyst
Inquiries:
|
Tobin Richer
|
Mike Eliason
|
(317)
665-0366
|
(317)
249-4559
|
tobin.richer@karglobal.com
|
mike.eliason@karglobal.com
|
About KAR
KAR Auction Services, Inc. d/b/a KAR Global
(NYSE: KAR), provides sellers and buyers across the global
wholesale used vehicle industry with innovative, technology-driven
remarketing solutions. KAR Global's unique end-to-end platform
supports whole car, financing, logistics and other ancillary and
related services, including the sale of nearly 2.6 million units
valued at over $40 billion through
our auctions in 2021. Our integrated physical, online and mobile
marketplaces reduce risk, improve transparency and streamline
transactions for customers in about 75 countries. Headquartered in
Carmel, Indiana, KAR Global has
employees across the United
States, Canada,
Mexico, Uruguay, Europe and the
Philippines. For more information and the latest KAR Global
news, go to www.karglobal.com and follow us on Twitter
@KARspeaks.
Forward-Looking Statements
Certain statements
contained in this release include, and KAR may make related oral,
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and which are subject to
certain risks, trends and uncertainties. In particular, statements
made that are not historical facts may be forward-looking
statements. Words such as "should," "may," "will," "can," "of the
opinion," "confident," "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," "continues," "predicts,"
"strategy," "outlook," "initiatives," "goals," "opportunities," and
similar expressions identify forward-looking statements. Such
statements are based on management's current expectations, are not
guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially
from the results projected, expressed or implied by these
forward-looking statements. Factors that could cause or contribute
to such differences include (i) KAR and Carvana may be unable to
complete the proposed transaction in a timely manner or at all,
which may materially and adversely affect KAR's business and the
price of KAR's common stock, because, among other reasons,
conditions to the closing of the proposed transaction may not be
satisfied or waived; (ii) uncertainty as to the timing of
completion of the proposed transaction; (iii) the occurrence of any
event, change or other circumstances that could give rise to the
termination of the purchase agreement; (iv) risks related to
disruption of management's attention from KAR's ongoing business
operations; (v) the effect of the announcement or the pendency of
the proposed transaction on KAR's relationships with its customers,
operating results and business generally; (vi) the outcome of any
legal proceedings to the extent initiated against KAR, Carvana or
others related to the proposed transaction; (vii) the ability of
KAR to execute on its strategy and achieve its goals and other
expectations after the completion of the proposed transaction; and
(viii) those other matters disclosed in KAR's Securities and
Exchange Commission filings. KAR does not undertake any obligation
to update any forward-looking statements.
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SOURCE KAR Global