On February 24, KAR Auction Services Inc. (KAR) announced a definitive agreement with Carvana for the acquisition of its ADESA U.S. physical auction business. Consequently, the stock surged in the after-hours on Thursday.
During the regular session, the stock was in the green with a small gain of 1.03% or $0.14. After oscillating between $13.12 and $13.76, KAR closed the session at a value of $13.69 per share. The day saw a volume of 3.82 million shares which was 174% of the average. Following the announcement, the stock surged up by a huge 69.47% at 2.12 million shares in the after hours. Hence, KAR stock was trading at a value of $23.30 per share in the after-hours session on Thursday. It seems investors are fully in favor of the sale of ADESA.
The used car auction and salvage auction services provider, KAR Auction Services Inc. was founded in 2006. Currently, its 121.15 million outstanding shares trade at a market capitalization of $1.64 billion.
KAR’s Agreement with Carvana
On Thursday, the company agreed to sell its ADESA business to Carvana in a definitive agreement. The transaction includes all auction sales, operations, and staff at 56 ADESA U.S. vehicle logistics centers along with the exclusive use of ADESA.com marketplace in the country. In line with KAR’s digital strategy, this all-cash transaction is valued at $2.2 billion.
Moreover, the company intends to use the proceeds from the transaction for reducing its corporate debt. As per the agreement, the company will be a technology partner to Carvana for supporting ADESA.com and related technology.
Additionally, the transaction is approved by the boards of both companies and is expected to close in Q2 2022.
Q4 2021 Financial Results
On February 16, the company declared its financial results for the fourth quarter of 2021.
In Q4 2021, the company has total revenue of $549.4 million with an increase of 4% YOY.
KAR’s net income was $5.1 million in Q4 2021 with a loss of $0.04 per diluted share. Comparatively, the company had a net loss of $17.1 million or $0.21 per diluted share in Q4 2020.
Furthermore, the company had adjusted EBITDA of $97.9 million in Q4 2021 against $67.5 million in the year-ago period. Thus, marking a growth of 45% YOY.
KAR’s Recent Developments
On January 25, the company and The National Auto Auction Association (NAAA) announced licensing of KAR’s Privacy PamTM privacy and security training program for use by NAAA member auctions.
