Apax Partners has agreed to purchase $550 million of perpetual convertible preferred stock of publicly traded KAR Global.
KAR Global (NYSE: KAR) operates used vehicle auctions and provides vehicle remarketing services in the United States, Europe, Canada, Mexico, and the United Kingdom.
The company operates through two segments, ADESA Auctions which sells used vehicles through both online auctions and physical auction facilities, and AFC which provides floorplan financing to independent used vehicle dealers and sells vehicle service contracts. Customers of KAR include vehicle manufacturers, fleet companies, rental car companies, finance companies, commercial fleets, and dealers. KAR has a network of 74 whole car auction facilities across North America.
“KAR took early and decisive steps in response to COVID-19 to protect the safety of our employees and customers, preserve our capital position and keep our operations moving forward,” said Jim Hallett, chairman and CEO of KAR. “This transaction will help us continue to support our global customers and further accelerate our digital transformation. Apax is the right strategic partner for our company, employees and stockholders, and their investment reinforces the strength of our brands, market position, and long-term strategy for growth and expansion.”
In 2019, KAR had revenues of $2.8 billion and EBITDA of $508 million and sold nearly 3.8 million used vehicles valued at more than $40 billion. KAR was founded in 2006 and is headquartered in Carmel, Indiana.
The newly issued preferred stock has a 7% dividend which is paid in-kind for the first two years and later in cash or in-kind at KAR’s option. The initial conversion price of $17.75 per share is a 42% premium to KAR’s closing price of $12.52 per share on May 22, 2020.
“KAR is an internationally recognized leader in wholesale remarketing with a strong track record of innovation,” said Roy Mackenzie, a partner at Apax. “The company’s market-leading digital platforms and investments in data analytics uniquely position them to thrive in the new digital normal. We look forward to partnering with KAR’s progressive and entrepreneurial management team to transform their industry and drive long-term value for all stockholders.”
Apax has experience investing in the digital automotive marketing sector through earlier investments in Dealer.com (exited in 2013), Trader Corporation (exited in 2016), and Auto Trader Group (exited in 2016).
Apax invests in the technology and telecom; services; healthcare; and consumer sectors. The firm has offices in London, New York, São Paulo, Munich, Tel Aviv, Mumbai, Hong Kong, and Shanghai.
New York-based Periphas Capital participated with Apax on this transaction. Periphas makes control and non-control investments in companies with $200 million to $2 billion in revenue that are active in the business services, industrial, technology and consumer sectors.
Goldman Sachs and J.P. Morgan were the financial advisors to KAR.
Private Equity Professional | May 28, 2020
XLerate Group, a portfolio company of Huron Capital, has acquired Columbus Fair Auto Auction. This is the eighth add-on completed by Huron since acquiring XLerate in May 2014.
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“Alexis has run the operation for over 30 years, earning esteem as an iconic independent auto auction with an impeccable reputation and consistently superior customer service,” said Mr. Hitchcock. “These attributes are a great fit with XLerate’s operating philosophy and track record of acquiring auto auctions with strong brand equity. We are honored that Alexis and Greg Levi have entrusted us to carry forward the Jacobs’ legacy at CFAA.”
“We are incredibly pleased to add CFAA’s strong family tradition and reputation surrounding service, dedicated staff and complementary sales platforms to our portfolio and are continually excited about its potential to grow and strengthen XLerate’s position as a leader in the auction industry,” said Matthew Lacki, a vice president at Huron Capital.
Huron Capital’s XLerate Group continues to grow with the recent buys of Morton Auto Auction (MAA) and Southeastern Auto Auction (SEAA).
“Adding MAA to the XLerate family helps solidify our Midwest footprint and adds another highly respected independent operator to our management team,” said Mr. Hitchcock. “We have stayed the course with XLerate’s long-term strategy to grow our business, footprint and service offerings by acquiring companies with high-quality independent sales and strong operating management.”
“We are excited to welcome SEAA to our extensive network of auction houses and to the growing XLerate family,” said Matthew Lacki, a vice president at Huron. “We believe our buy-and-build strategy and XLerate’s strong management team provide the company with the resources necessary to be an industry leader.”
Huron Capital is an operationally-focused private equity firm that makes control and non-control investments in companies with revenues of $20 million to $200 million and EBITDAs of $5 million or more. Sectors of interest include business services, consumer goods & services, and specialty industrials. Founded in 1999, Detroit-based Huron Capital has raised over $1.8 billion in capital through six private equity funds and invested in over 150 companies (
