Carsales.com has announced the purchase of a 49% stake in US online marketplace Trader Interactive to be funded by a $600m rights offer. The latter is a 1 for 6.99 accelerated rights offer at $17, a -12.9% discount to the company’s last close of $19.51.
Trader Interactive is a platform of branded marketplaces in the US, providing digital marketing solutions and services across the commercial truck, recreational vehicle, power sports and equipment industries.
Management has no immediate plans to pivot Trader Interactive into the car vertical. UBS sees the key opportunity is to leverage expertise with demand-based revenue models (i.e. leads). Trader Interactive has a supply-based subscription revenue model.
At this stage the Buy rating and $24.50 target are retained while the analyst conducts further financial analysis.
Sector: Software & Services.
Target price is $24.50.Current Price is $19.51. Difference: $4.99 – (brackets indicate current price is over target). If CAR meets the UBS target it will return approximately 20% (excluding dividends, fees and charges – negative figures indicate an expected loss).