Auto Trader to create wholesale joint venture with Cox Automotive
AUTO TRADER GR
£6.77
17:35 18/04/24
Auto Trader Group has entered into an agreement to create a joint venture with Cox Automotive UK, it announced on Thursday, to provide a digital marketplace for wholesale vehicles in the UK.
The FTSE 250 company said the joint venture would provide the UK automotive market with a “comprehensive” online auction service.
It said the business would be called ‘Dealer Auction’, and would provide fleet companies, manufacturers and retailers with a “more efficient and convenient” way to dispose of their stock of vehicles.
Retailers would gain access to wider stock of vehicles available for them to buy, supported with the data and tools to allow them to select the vehicles for their specific needs.
The business would offer a full service, along with its business partners, which Auto Trader said had “significant experience” in digital, wholesale and retail solutions.
The joint venture agreement remained conditional upon clearance from the Competition and Markets Authority in the UK.
Subject to clearance, the new business would combine three businesses onto a single platform.
Cox Automotive would transfer both Dealer-Auction.com, which is an online auction of trade-in vehicles from UK franchise dealers, and Manheim Online, its online remarketing services division, to the joint venture.
Auto Trader said it would transfer Smart Buying - formerly known as Autotrade-mail - its retailer-to-retailer platform.
Once combined, the three businesses would reportedly enable prospective buyers to visit one platform and view a large selection of wholesale vehicles across the marketplace.
Dealer Auction would be co-owned by both companies, with Cox Automotive UK holding 51%, and Auto Trader holding the remaining 49% of the new entity.
The transaction was expected to be earnings-enhancing in the first full year of operation.
“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,” said Auto Trader chief executive Trevor Mather.
“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.”
Mather said he was “delighted” that the company was creating the joint venture with Cox Automotive, who he said the board had found to be “forward thinking and culturally aligned” to their 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, added that the next five years would see an “unprecedented” level of change in the industry, driven by an 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,” Forbes said.
“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.”
Auto Trader said it would contribute assets valued at £28.7m, or a book value of £8.6m, and pay £19.7m in cash to Cox Automotive.
Cox would contribute assets valued at £70.1m.
The EBITDA of the business being transferred by Auto Trader - Smart Buying - was £2.5m in year ended March, and the aggregate EBITDA of Dealer-Auction.com and Manheim Online was £6.2m in calendar year 2017.
Under the terms of the joint venture agreement, if after the first two years of operation, a deadlock situation arose between Auto Trader and Cox Automotive and the proposed dispute resolution process was unsuccessful, then Auto Trader could be required to transfer its entire shareholding in the joint venture to Cox Automotive at a prevailing market value.