Carsales raising $1.2bn to takeover US truck and RV marketplace

Carsales.com (ASX: CAR) is set to fully acquire US commercial trucks and RVs marketplace business, Trader Interactive.

Carsales purchased a 49% stake in the business back in September 2021 for $797m. The remaining 51% will be purchased for approximately $1.2bn.

The company’s stock went into trading halt this morning to raise $1.2bn.

Capital raise details

• $1,207m raised at an offer price of $17.75 per new share

• The offer price represents a 14.5% discount to the last closing price of $20.76 on Friday

• Approximately 68m new shares will be issued, equivalent to 24% of existing shares on issue

Timeline wise:

• Carsales shares will resume trading on Wednesday, 29 June 

• New shares issued under the institutional offer will be issued on Tuesday, 5 July

• New shares issued under retail entitlement offer will be issued on Tuesday, 19 July

Introducing Trader Interactive

Trader Interactive connects buyers, sellers and renters in the powersports, recreational vehicle (RVs), aircraft, marine, commercial vehicle and heavy equipment industries through a portfolio of marketplaces. 

Collectively, the platforms reach over 13m monthly unique visitors.

Acquisition rationale

Carsales considers Trader Interactive as a reliable business that performs well through economic cycles - a relevant consideration amid looming recession concerns. Some notable highlights of the standalone business include:

• Trader Interactive has a 14% revenue compound annual growth rate (CAGR) over the last 15 years

• Used transactions are less cyclical than new transactions

• 84% of revenue is recurring, locking in stability through business cycles

As a combined entity, Carsales highlighted:

• Low double-digit EPS accretion in the first full year after completion

• Exposure to an attractive US market that is x16 larger than the Australian non-automotive market

• Opportunity to grow Trader Interactive market share (currently 6%)

Paying too much?

Private equity vendors previously flipped the initial 49% ownership to Carsales for around 1.5 times their initial investment, according to Private Equity Wire.

The outstanding 51% will return them around 2.8 times.

At today's purchase price, Carsales is valuing Trader Interactive at a generous 12.2 times revenue.

Carsales price chart