Auto Trader Group plc (LSE: AUTO, “Auto Trader” or the “Company”), the UK’s largest digital automotive marketplace, is pleased to announce that it has entered into an agreement (the “JV Agreement”) to create a joint venture with Cox Automotive UK Limited (“Cox Automotive”) to provide a leading digital marketplace for wholesale vehicles in the UK.
The joint venture will provide the UK automotive market with a comprehensive online auction service. The business will be called Dealer Auction, and will provide fleet companies, manufacturers and retailers with a more efficient and convenient way to dispose of their stock of vehicles. Retailers will gain access to a more comprehensive stock of vehicles available for them to buy and this will be supported with the data and tools to allow them to select the right vehicles for their specific needs. The business will offer a full service, along with its business partners, who have significant experience in digital, wholesale and retail solutions.
The JV Agreement is conditional upon clearance from the Competition and Markets Authority in the UK. Subject to clearance, the new business will combine three businesses onto a single platform. Cox Automotive will transfer both Dealer-Auction.com, which is an online auction of trade-in vehicles from UK franchise dealers, and Manheim Online, the online remarketing services division of Cox Automotive, to the joint venture and Auto Trader will transfer Smart Buying (formally known as Autotrade-mail), it’s retailer-to-retailer platform. Once combined, the three businesses will enable prospective buyers to visit one platform and view a large selection of wholesale vehicles across the marketplace.
Dealer Auction will be co-owned by both companies, with Cox Automotive UK Limited holding 51%, and Auto Trader Limited, a subsidiary of Auto Trader Group plc, holding the remaining 49% of the new entity. The transaction is expected to be earnings enhancing in the first full year of operation.
Trevor Mather, Chief Executive Officer of Auto Trader, said: “The way in which vehicles currently move around the UK automotive ecosystem is overly complex and inefficient, and Auto Trader has the digital and data assets that can make it a quicker, more convenient and cheaper process for all parties. However, we know that we will have an even better chance of disrupting the market by partnering with an established player which knows this particular industry intimately.
“I am delighted that we are creating this joint venture alongside Cox Automotive, who we have found to be forward thinking and culturally aligned to our business. We believe that together we can fundamentally improve and lead change in this market, for the benefit of both wholesalers and retailers alike.”
Martin Forbes, Chief Executive Officer at Cox Automotive, said: “The next five years will see an unprecedented level of change in our industry, driven by the ever-increasing influence of digital. Cox Automotive is already providing our customers with choice through our wholesale digital platforms of Dealer-Auction.com and Manheim Online, as well as physical auctions and vehicle services via Manheim.
“Cox Automotive and Auto Trader have a shared vision to transform the wholesale automotive market in the UK for the benefit of our current and future customers. Our core strengths are extremely complementary, and we believe that Auto Trader’s digital and data expertise combined with Cox Automotive’s wholesale channels and vehicle handling capabilities will deliver a market changing B2B platform. We are confident that this will be a long term and very successful partnership.”
Auto Trader will contribute assets valued at £28.7m (book value £8.6m) and pay £19.7m in cash to Cox Automotive. Cox will contribute assets valued at £70.1m. The EBITDA of the business being transferred by Auto Trader, Smart Buying (formerly Autotrade-mail), was £2.5m in year ended March 2018, and the aggregate EBITDA of Dealer-Auction.com and Manheim Online was £6.2m in calendar year 2017.
Under the terms of the JV Agreement, if, after the first two years of operation, a deadlock situation arises between Auto Trader and Cox Automotive and the proposed dispute resolution process is unsuccessful, then Auto Trader may be required to transfer its entire shareholding in the joint venture to Cox Automotive at a prevailing market value.
Completion of the transaction will be subject to clearance by the Competition and Markets Authority.
This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation.