We round out what has – to say the least – been a forgettable 2021-22 financial year with some updates from auto trader Carsales.com and Brisbane-based testing group ALS Ltd.
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Carsales.com’s (ASX: CAR) takeout of the 51% it doesn’t own in Trader Interactive (TI), the US auto ad other products sales website, has been given a big tick from ratings group Moody’s.
Carsales is in the process of raising around $A1.2 billion to fund the deal which will be supported by around $A520 million from its existing lenders.
In a report this week Moody’s pointed out that the commitment by Carsales to payout TI’s debt was “credit positive.”
“The acquisition would be credit positive because Carsales intends to repay all of Trader Interactive’s outstanding debt upon the deal’s closure, which is likely in the third quarter, pending various conditions and regulatory approvals.
“Trader Interactive’s credit profile will benefit from a single long-term strategic owner from which it can leverage expertise and potentially less aggressive financial policies… we expect to withdraw Trader Interactive’s ratings after the $388 million of the outstanding debt is repaid.”
“Carsales equity issuance is fully underwritten and we believe Carsales strong balance sheet provides adequate capacity to raise new debt with reported pro forma debt/EBITDA increasing to around 3.4x from around 2.5x as of year-end 2021.
Trader Interactive is a leading provider of branded online marketplaces in the US, providing digital marketing services for the recreational vehicles (RV), powersports, commercial truck and equipment industries.
Carsales operates the largest automotive, motorcycle and marine classifieds business in Australia as well as a leading automotive business in South Korea.
In addition, Carsales wholly owns classifieds businesses in Mexico, Argentina and Chile and is a significant minority shareholder of webmotors in Brazil and has held a 49% stake in Trader Interactive since August 2021.
Carsales shares ended up 0.7% at $18.39 on Thursday.
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Still on deals and as reported earlier this week, Brisbane-based testing group ALS Ltd (ASX: ALQ) is buying a smaller rival, HRL, for just over $82 million in an agreed deal.
ALS will offer 16 cents for each HRL share, a massive 95% premium to the last price before news of the bid leaked on June 27.
With that sized premium it is no wonder that HRL’s Board of Directors had unanimously recommend the offer to shareholders in the absence of a superior proposal.
HRL Directors, who in aggregate own or control 18.59% of the HRL shares on issue as at the date of this announcement, have indicated that they intend to accept the offer for the shares that they own or control, in the absence of a superior proposal.
HRL non-executive chair Mr Greg Kilmister noting that the HRL Board has considered and approved the offer said:
“The HRL Board is unanimous in its view that this transaction is in the best interests of HRL shareholders. In making this assessment, the Board has carefully considered a range of matters including its view of the intrinsic value of HRL taking into account the company’s current position and future prospects, and the certainty for shareholders of this all-cash offer. We believe this transaction is a very good outcome for HRL’s shareholders, and for stakeholders more broadly, including our customers, staff and suppliers.”
Mr Kilmister is a former long time CEO of ALS which helps explain why the bid will succeed.
ALS says it will pay the cost of the bid from its cash on hand.
HRL shares ended the day on 16 cents.
