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CARSGUIDE will come under the umbrella of US automotive conglomerate Cox Enterprises' new subsidiary in Australia, Cox Automotive Australia, as part of a new merger deal announced this morning.
News Corporation (ASX:NWS) will exit its 50 per cent stake in CarsGuide upon settlement of the merger, which is subject to regulatory approval and a capital raise. The deal is expected to be complete by the end of 2016.
The new company brings together three complementary businesses CarsGuide, Dealer Solutions and Manheim Australia and New Zealand and sets the scene for renewed competition with Carsales.com.au (ASX:CAR).
Motor industry analyst John Mellor tells Business News Australia that a group of 35 Australian dealer groups, representing more than 700 dealerships, partnered with News Corporation in 2011 to create CarsGuide to take on the "hugely powerful" Carsales. The role that the dealers will have in the new business is still being decided.
"There was always a concern that if Carsales dominated, then it would dictate terms on how cars were sold in Australia and what it would charge to do it. The dealers joined with News Corp because they felt that it was going to be a strong association," says Mellor.
"It has taken years to get to where they are and in many ways the dealers have achieved what they set out to do, and that was to get a highly competitive market for classified advertising."
The group will begin operating under the name of Cox Automotive Australia, but each brand will retain its own identity and focus.
Cox Automotive has been operating in Australia for a number of years through Manheim Australia and New Zealand, which it owns worldwide. Manheim acquired Dealer Solutions, a Brisbane based provider of tech solutions for car dealerships with 3,000 clients and 95 employees, earlier this year. Also thrown into the mix in the new group is sellmycar.com.au.
Cox Automotive is one of three major operating subsidiaries of Cox Enterprises, a global firm based in Atlanta with 55,000 employees and revenues of more than US$18 billion. It is the owner of the world's two largest online car marketplaces, Auto Trader and Kelley Blue Book, which have a combined audience of 18 million UA each month.
Lauren Williams, CEO of CarsGuide says, "As part of Cox Automotive Australia, we expect to be able to further facilitate the links between the wholesale and retail markets so our customers can take full advantage of the synergies offered by the new brand suite. The move will especially allow us to offer our dealer customers an even greater range of channels in which to sell and buy their vehicles."
Manheim is a wholesale remarketer and sells assets such as passenger and commercial vehicles, trucks, trailers, machinery, motocycles, plant and equipment and written off vehicles in regular weekly and monthly auctions open to both trade and public buyers. It has around 650 team members across all states in Australia and in New Zealand.
Carsales (ASX:CAR) reported a 6 per cent increase in profit for FY16 today. It's shares took an early hit in trading this morning, dropping to $11.58 per unit, but have since recovered to $12.69, a 2.59 per cent increase on the start of trading.
Since its September 2014 relaunch, CarsGuide has almost doubled its audience and recently attracted one million unique visitors in one month for the first time, whereas Carsales says it receives 1.6 million unique visitors monthly.
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