The Carsales.Com Ltd (ASX: CAR) share price has returned from its trading halt this morning and is tumbling lower.
At the time of writing, the auto listings company's shares are down 7% to $18.17.
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Why was the Carsales share price in a trading halt?
Carsales requested a trading halt so that it could raise funds for a major new acquisition.
Last week the company signed an agreement to acquire a 49% stake in United States-based business Trader Interactive for approximately US$624 million (A$800 million). It also has a call option to acquire the remaining interest on specified terms in the future.
Trader Interactive is a leading platform of branded marketplaces in the US. It provides digital marketing solutions and services across commercial truck, recreational vehicle (RV), powersports, and equipment industries.
The business generated adjusted revenue of US$123 million and adjusted EBITDA of US$61 million in 2020. The latter means its EBITDA has now grown by a compound annual growth rate of 13% over the last five years.
Management notes that the acquisition represents a strategically compelling opportunity to further build out its international scale and industry diversification with exposure to attractive verticals in the United States. It is expected to be earnings per share positive on a pro-forma basis, with mid-single digit earnings per share accretion from year one.
Equity raising
This morning Carsales announced the successful completion of the institutional component of its $600 million pro rata accelerated renounceable entitlement offer with retail rights trading.
According to the release, the institutional entitlement offer raised approximately $428 million at the offer price of $17.00. This represents a 12.9% discount to its last closing price of $19.51.
Management advised that the offer was well supported by institutional shareholders, with a take-up of approximately 83% by eligible institutional shareholders.
Carsales' CEO, Cameron McIntyre, said "We are very pleased with the level of support we have received from our institutional shareholders, in particular domestic institutional investors who took up 99% of their entitlements. We firmly believe that this acquisition creates compelling value for our shareholders through accelerating our international growth strategy by providing us with exposure to a significant market in the United States across attractive non-automotive verticals."
The company will now push ahead with the retail component of the entitlement offer. This is expected to raise approximately $172 million, taking the total to approximately $600 million. The retail entitlement offer will open on Wednesday 19 May 2021 and close on Wednesday 2 June 2021.
