First, it was the Cash for Clunkers program. Then, it was some heartening car-sale numbers. Now, it is Adesa’s planned $400 million initial public offering.
Things are looking up for the auto industry.
Adesa’s parent Kar Holdings Inc. filed for an IPO yesterday. The company did not set an offering date.
In the filing, which you can view here, Kar indicated that stability in the remarketing market was one of the reasons for its offering:
During the period of 2004 through 2008, vehicles sold at whole car auctions in North America ranged from 9.4 million to 9.7 million vehicles per year, and we expect this stability to continue. This stability is primarily driven by the consistent population of cars on the road, as opposed to being dependent on the more volatile new car build rate. Positive trends which should influence future retail demand for used vehicles include increases in the number of households with more than one vehicle, improvements by manufacturers that have extended vehicle lifespan and the affordability of used vehicles relative to new vehicles.
Kar claims to be the nation’s second-largest vehicle auction house behind Manheim. According to Kar, Adesa in North America maintains an estimated marketshares of more than 21% and 35% in the whole car and salvage auction markets, respectively. Adesa owns 62 whole car and 152 salvage auction locations in North America.
From 2004 through 2008, Kar grew its whole car and salvage revenue per vehicle at compound annual growth rates of 7.1% and 4.7%, respectively. That said, it’s earnings before interest depreciation and amortization have fallen over the last couple of years to $212.2 million in the six months ended June 30 from $233.9 million in the first six months of 2008 and $405.2 million in 2007. On an operating basis, the company is barely profitable.
Kar generated $881.6 million of revenue in the first six months of this year.
Kar is currently owned by a quartet of private equity firms: Kelso & Company, GS Capital Partners (a Goldman Sachs & Co. unit), ValueAct Capital, and Parthenon Capital. The firms purchased Kar in 2007.
This article was originally posted on our new sister site Inside Remarketing.
And to add to my rant; the true lifeblood of the US has always been hard work and risk taking – which in turn equated to potential rewards. But as our President made clear – he believes it is better for society if the wealth is shared – implying “regarless of effort of level of risk taken”. This is nothing short of Marxism. I don’t care for politics, but I do personally beleive that capitalism was the sole reason why the US emerged as the world’s only superpower. And China’s economy never became white hot until they embraced (albeit slowly) capitalism. And the cold war was won by the US due to the complete failure of socialsim. This opinion is only based on what I’ve read about world history. Of course, I could be right.
Insiders are bailing out…. The headline might read “Auto Investors Run for the Hills” in anticipation of continued bad news. (now that I read the S-1 – I see your point) ‘(i) to repay certain of our indebtedness, (ii) to pay termination fees to each of our Equity Sponsors”. Your Not cynical JJ. Cheers
Maybe not a cynic, but a realist.
JJ,
I read the filing and didn’t see PAR mentioned. If they’re including PAR I would think they would need to disclose the risk of the auto repossession industry, or maybe they’re spinning off PAR? On the PAR website it clearly states they’re an Adesa company, and while those filings are a bear to read through, I didn’t see PAR mentioned and was wondering if you knew if PAR was included in the filing and if not, what happens with PAR?
Thanks
John Lewis
Great web site, btw. I was one of the first to join and its nice to see how well it’s come along…
John,
First, thanks for the kind comment about AutoFinanceNews.net. We work very hard on it, and it is good to see our efforts are noticed. Thanks.
As for PAR, the short answer is, yes, I believe it is included — although I am having trouble digging up evidence for you. If you go to this listing of companies related to the Kar IPO, you’ll see PAR on the list, along with AutoVin, for example, another Kar/Adesa company. Hope this helps.