Australian automotive classifieds business Carsales.Com Ltd (ASX: CAR) today announced that it has acquired one of its biggest competitors, DeMotores, which operates Spanish-language websites in Chile, Argentina, and Colombia.
Carsales.Com already owns the leading Chilean website, Chileautos, of which it acquired 83% in March 2013. The acquisition of DeMotores gives Carsales control of the #1 and #2 websites in Chile, making it the uncontested leader in that country. Argentina is still up for grabs, with DeMotores the #2 website in that region. The market position in Colombia was not stated.
The acquisitions leverage off Carsales' previous investments in Spanish-language websites, with its Mexican website and the Chilean purchase last year. Now, most of Latin America can compra venta de autos, facilitated by Carsales, which has become the largest classifieds provider across the region:
The purchase price of DeMotores is small, at A$6.7 million, and won't contribute meaningfully to earnings for some time yet. However, Carsales has bought its way into a market-leading position in a group of nations with very favourable automotive tailwinds:
Levels of household car ownership and online automotive advertising are very low, and demand for vehicles is strong and growing as these economies expand. Carsales has done well to get into the region early and ahead of the swing-shift to online advertising. With any luck, it will be able to parlay these small purchases into disproportionately large successes over the next 20 years.
However, there are other concerns about Carsales' domestic operations in the near term – the Australian operations generate the vast majority of profits – and investors should be careful not to overpay for the company's international opportunities.
