Carsales.com says it book a massive book profit from a near quarter of a billion dollar deal to move deeper into the South Korean car sector.
The company told the ASX yesterday it had signed a memorandum of understanding with SK Holdings to buy the remaining 50.1% stake in South Korean joint venture Encar.com for about $244 million, before adjusting for working capital.
The deal was expected to be signed next month and completed in January. Carsales said the new investment is expected to be funded by new syndicated debt facilities .
Carsales.com bought a 49.9% stake in Encar.com in April 2014.
The online auto classifieds company’s existing stake in the joint venture would be revalued for accounting purposes, creating a one-off non-cash gain of about $100 million.
Car Sales CEO Cameron McIntyre says “This acquisition is a significant milestone in carsales’ long term strategy to be the global leader in online auto classifieds. Encar.com has been one of our strongest performing overseas businesses and has continually delivered good revenue and earnings growth”.
“Our increased investment is testament to our confidence in the strength of the South Korean market and the long term growth potential of Encar.com” said McIntyre. “carsales and Encar.com will enjoy the benefits of a continued strategic partnership with the SK Group.”
The company anticipates the deal to be neutral for adjusted earnings in fiscal 2018 and will add to earning from 2019 and beyond.
Shares of carsales.com fell as much as 2% at the news but the loss eased and they ended the day down 0.3% at $13.55.
