Vehicle classifieds company Carsales.com (ASX: CAR) has announced a $500 million raise to fill the tank with funds to lift its investment in Brazilian online automotive site Webmotors and polish up its balance sheet.
A total of $353 million will be committed towards the group acquiring a further 40 per cent of shares in Webmotors, increasing Carsales.com’s total ownership to 70 per cent while global consumer bank Santander retains a 30 per cent stake.
It comes eight months after the company sought $1.2 billion in capital to take full control of US-based RV and powersports marketplace platform Trader interaction (TI).
Almost a decade ago, Carsales.com acquired a 30 per cent stake in Webmotors – a time when the Melbourne-based company was worth roughly $2.06 billion in market capitalisation, but has since grown to $7.95 billion.
Shares for the raise will be sold at $19.95 each, offering a 10.8 per cent discount to the last closing price of $22.36 on 7 March. The deal will also allow shareholders to receive one new share for every 14.01 held.
The excess proceeds of $133 million will be used to strengthen Carsales.com’s balance sheet, reduce leverage and increase capacity to pursue future growth opportunities.
“Carsales.com and Santander have developed a strong working partnership over the last 10 years of joint ownership in Webmotors, which is reflected in Webmotors’ market leadership in one of the largest and fastest growing car markets in the world,” Carsales.com CEO Cameron McIntyre said.
“Webmotors is an outstanding automotive digital marketplace business with an innovative culture, a proven track record of strong growth over time and significant opportunities for future growth.
“Closer alignment to the Carsales.com business makes strategic sense for both Carsales.com and Santander to ensure Webmotors’ continued long term success and delivery of value to our shareholders.”
Founded in 1995 in São Paulo, Webmotors is one of the largest online auto marketplaces in Brazil, with a monthly unique audience of about 10 million and 17,000 subscribed dealers.
In the 12 months to December 2022, the company generated revenue of BRL$353 million (AUD$ 100.5 million) and EBITDA of BRL$143 million (AUD$ 40.7 million). Over the last six years, revenue has grown at a compound annual growth rate of 23 per cent while earnings have risen by 28 per cent.
The increased stake in Webmotors is part of Carsales.com’s ongoing strategy to acquire minority stakes in attractive international markets and move to control positions over time, consistent with successful acquisitions in South Korea and the United States.
“We believe that the new format of the agreement will allow us to further expand the volume of car financing made through the portal and to access technological innovation that will certainly result from this partnership,” Santander Brasil CFO Angel Santodomingo said.
“At the same time, it further boosts the development of Webmotors due to its proximity to a company that is the best international partner we could have in this segment.”
The acquisition remains subject to certain conditions and is expected to be finalised in Q4 FY23.
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