The Carsales.Com Ltd (ASX: CAR) share price is going to be in focus after going into a trading halt to buy a large stake of Trader Interactive.
What’s Trader Interactive?
Trader Interactive is a platform of branded marketplaces in the US, providing digital marketing solutions and services across commercial truck, recreational vehicle, powersports and equipment industries.
During the 2020 calendar year, it made ‘adjusted’ revenue of US$123 million and adjusted ‘EBITDA’ (EBITDA explained) of US$61 million.
What is this costing Carsales?
Carsales is going to acquire a 49% stake of Trader Interactive for US$624 million. An enterprise valuation of the total business of US$1.625 billion, representing an enterprise value / EBITDA acquisition multiple of 26.5 times.
The transaction is forecast to be profit / earnings per share (EPS) positive from completion, with mid-single digit EPS growth from year one, which is expected to grow thereafter.
Carsales also has a call option to buy the rest of Trader Interactive in the future.
How is this being funded?
It’s going to be funded by a $600 million fully underwritten pro-rata accelerated renounceable entitlement offer with retail rights trading. The rest of the acquisition will be funded by an upsizing of the existing debt facility from existing lenders.
Management comments
Carsales CEO Cameron McIntyre said: “Having held Australian market leading positions in bikes, boots, caravans (RV’s) and truck marketplaces since 2005, the company has developed strong intellectual property and product & technology capabilities that can be leveraged into global markets.
“We have demonstrated an ability to build valuable international partnerships over many years in our automotive business and see this acquisition as an important milestone in carsales’ international and vertical marketplace expansion. It also represents a significant investment to support our long-term growth.
“This acquisition is expected to accelerate our international growth strategy by providing us with exposure to a significant market in the US across attractive non-automotive verticals. We are excited by the opportunity this investment provides carsales and look forward to working closely with Trader Interactive in helping them achieve their objectives and delivering shareholder value.”
Summary thoughts on the Carsales share price
The Carsales share price hasn’t done too much over the last six months, but this acquisition could bring some more investor interest. Diversifying and growing is very useful for a global business like Carsales.
I’m not sure about Carsales’ growth potential, but it seems to be better after this acquisition.
However, there are other ASX growth shares that could be able to make even more global profit growth over time for the current valuations.
