KAR Auction Services (KAR) Stock: Why It Increased

By Amit Chowdhry ● Feb 26, 2022
  • The KAR Auction Services Inc (NYSE: KAR) stock increased by 38.35% in the most recent trading session. This is why.

The KAR Auction Services Inc (NYSE: KAR) stock increased by 38.35% in the most recent trading session. Investors are responding to an M&A deal.

Carvana signed a definitive agreement to acquire ADESA’s US physical auction business (ADESA U.S.), a wholly-owned subsidiary of KAR Global, subject to customary closing conditions, for $2.2 billion in cash. And ADESA U.S. is the second largest provider of wholesale vehicle auction solutions in the U.S. with 56 sites and approximately 4,500 corporate and operations team members. Last year, the ADESA U.S. business facilitated more than 1 million transactions through those sites, which total approximately 6.5 million square feet of buildings on more than 4,000 acres.

Carvana and ADESA U.S.’s footprints are highly complementary and combining them extends the collective reach of the 2 businesses. And ADESA U.S.’s existing and potential reconditioning operations can contribute approximately 2 million incremental units to Carvana’s annual production at full utilization. And 78% of the U.S. population lives within 100 miles of either an ADESA U.S. or existing Carvana inspection and reconditioning center, meaning customers will have access to more vehicles with faster delivery times than ever before.

Carvana is going to continue to operate ADESA U.S.’s existing wholesale auction business and related services under the ADESA brand. And ADESA U.S. President John Hammer additional senior and executive leadership and teams will transition to Carvana after the deal is closed. The ADESA U.S. business generated over $800 million of revenue and over $100 million of EBITDA in 2021.

Carvana has received committed financing of up to $3.275 billion from JPMorgan Chase Bank N.A. and Citi and intends to fund the purchase price and an additional $1 billion in improvements across the 56 sites through a committed debt financing.

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.