Australia has proven to be too small a market for Carsales.com, which has moved to expand its late 2021 move into the huge US auto market.
To do that it is looking to raise $1.2 billion from shareholders to fully acquire US listings business Trader Interactive.
Carsales bought a 49% stake in Trader Interactive in September last year for around $797 million and will now by the remaining 51% of the US company it does not already own for about $1.17 billion.
The shares went into a trading halt on Monday to allow the start of the raising. Trading will resume on Wednesday, June 29.
The $1.9 billion plus will see it take control of a business that connects buyers, sellers and renters in the power sports, recreational vehicle (RVs), aircraft, marine, commercial vehicle and heavy equipment industries through a portfolio of marketplaces.
Collectively, the platforms claim to reach over 13 million monthly unique visitors.
The $1.21 billion raising will be done at $17.75 per Carsales share — a 14.5% discount to its last closing price.
Around 68 million shares will be issued, so there’s a pretty big dilution of 24%.
“The acquisition is expected to generate attractive financial returns for shareholders with low double-digit EPS accretion in year one,” Carsales CEO Cameron McIntyre said in Monday’s statement to the ASX.
Along with the deal, Carsales.com also revealed a solid performance in the first five months of fiscal 2022 (it balances December 31).
The improvement “reflects continued healthy levels of demand” in the Australian automotive and non-automotive markets.
It expects adjusted net profit after tax of between $194 million and $196 million for 2022, higher than last year’s $153 million.
It is buying into the US auto markets at a time when prices of all vehicles are high because of widespread component shortages, supply chain problems and strong demand.
High petrol prices are a growing negative though along with continuing fears of a recession next year or 2024.
This could make this big move problematic if not managed closely.