The Carsales.Com Ltd (ASX: CAR) share price has returned from its trading halt and dropped deep into the red.
In morning trade, the auto listings company's shares are down 7% to $21.10.
Why is the Carsales share price sinking?
The Carsales share price is falling on Monday after it announced the completion of its institutional entitlement offer.
According to the release, the company raised approximately $380 million at the offer price of $19.95 per new share. This represents an 11.9% discount to the Carsales share price prior to the halt.
The offer was well supported by eligible institutional shareholders with a take-up of approximately 96%. Furthermore, a bookbuild for shares not taken up in the offer cleared at a price of $21.75 per new share. This represents a premium of $1.80 to the offer price.
The company will now push ahead with the retail entitlement offer, which aims to raise a further $121 million.
Why is Carsales raising funds?
This capital raising was undertaken to support the acquisition of an additional 40% of Webmotors for approximately A$353 million. Webmotors is the number one automotive digital marketplace in Brazil.
This agreement will see Carsales increase its stake in Webmotors to 70%, with Banco Santander retaining a 30% stake.
Carsales expects that the equity change will allow Webmotors to benefit further from its expertise in digital marketing, customer experience, products, and services within the digital automotive ecosystem.
Carsales CEO, Cameron McIntyre, was pleased with the response from institutional investors. He commented:
We are very pleased by the strong level of support received from institutional shareholders and their endorsement of our strategy. The acquisition of a further 40% interest in webmotors is an exciting opportunity for carsales and we look forward to continuing to grow the business in the attractive Brazilian automotive market alongside Banco Santander (Brasil) who, following successful completion of the acquisition, will be a 30% shareholder and partner in the business.
