The automotive arm of Atlanta-based Cox Enterprises announced Monday it will pay $4 billion to acquire Dealertrack, a publicly traded company that provides software, marketing and e-commerce services for car dealers.
The all-cash deal will add to Cox Automotive’s stable of brands, including online marketplace AutoTrader, auction giant Manheim and valuation company Kelley Blue Book. Dealertrack will become a private subsidiary under the Cox Automotive division after the expected closing of the acquisition in the third quarter of this year.
The acquisition requires approval of a majority of shareholders.
Sandy Schwartz, president of Cox Automotive, said the two companies are complementary businesses — not competitors — and the combination will provide dealers, consumers and manufacturers with more products that make buying and selling cars easier.
Cox Automotive, with 24,000 employees and annual revenue of about $5 billion in 2014, is the second-largest division of Cox Enterprises, which also owns The Atlanta Journal-Constitution.
With about 5,000 employees, Dealertrack’s various software and services connect dealers with lenders, manufacturers and after-market parts companies. Its subsidiary, Dealer.com, also provides marketing services and produces websites for dealerships.
The acquisition values Lake Success, N.Y.-based Dealertrack at $63.25 per share, a premium of nearly 60 percent over the company’s share price at the end of trading on Friday. Schwartz called the deal a fair price for the growing company.
Dealertrack has been an aggressive acquirer of companies, building a portfolio of dealership service brands. Revenue was $854.4 million last year, an increase of more than three-quarters from 2013. But the company lost $17.3 million, or 33 cents per share, in part because of acquisitions costs. Dealertrack’s reported profit was $5.9 million in 2013.
In the first quarter, Dealertrack revenue climbed 59 percent, but its loss was $22.7 million, up from $11.6 million in the first 90 days of 2014.
Auto sales have rebounded in the U.S. since the depths of the recession. Sales of new autos in the U.S. were up 4.5 percent to more than 7 million in the first five months of 2015, according to Automotive News.
Schwartz said car buying and selling is still mostly an in-person experience between dealers and consumers or individual sellers and buyers.
But, he added, “auto buying is becoming, to some degree, a digital transaction.”
Schwartz said he expects growth in the auto market to continue to be strong for the next few years.
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