Latin leap
EQUITY RAISE AND ACQUISITION
Need To Know
- CAR acquiring further 40% in webmotors in Brazil for ~A$353m, stake now 70%
- CAR raising A$500m equity in 1 for 14 pro rata entitlement offer at $19.95 per share
- Pro forma gearing 1.9x
The strong performance of webmotors SA has encouraged Carsales to lift its stake giving it even greater influence on progress. The Brazilian business is already consistently profitable in the fifth largest automobile market in the world. Consolidating webmotors will shift geographic earnings further towards an even split between international and Australia.
Capital raise. A fully underwritten pro rata entitlement offer of 1 for 14.01 shares at $19.95 per new share will raise approximately $500m. The offer price is a 10.8% discount to the closing price on 7 March 2023. The Retail offer opens on 15 March and closes on 30 March 2023.
The acquisition of the webmotors stake is approximately A$353m so the additional proceeds are being used to strengthen the CAR balance sheet. Pro forma leverage at 31 December 2022 is 1.9x.
Webmotors. Brazil is a big market with over 78m vehicles on the road and 14m new and used vehicles sold each year. Of the 28k car dealers, only about one third are signed up with webmotors presently, so the opportunity is large. Even so, webmotors is the clear market leader for online car sales advertising.
The transaction effectively swaps the position of CAR with its partner Santander, which has one quarter share of the auto finance market in Brazil. The partnership is deep and long.
Investment View
CAR has always said it was interested in a larger stake in webmotors given the attractive market dynamics and solid partnership with Santander. The transaction implies webmotors is worth about A$883m (100%) representing a multiple of 20x FY23f EBITDA, a similar multiple to CAR.
CAR has previously established minority stakes in South Korea and the USA then lifted its stake to a control position over time. The Brazilian investment has been a quiet achiever within the international portfolio so the move to lift the stake is likely to be positive for CAR.
This is a fairly small transaction in the context of CAR’s business but should be well received by investors nonetheless.
We retain our Hold recommendation.
Stock Overview
Share Price
Company Overview
CAR is the largest online automotive classifieds business in Australia. The network has operations across the Asia Pacific region and CAR has interests in classified businesses in Brazil, USA, Mexico, South Korea and Chile.
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