Cox-Dealertrack deal to create full-service dealer software powerhouse

$4 billion deal puts 59% premium on Dealertrack shares from Friday

Cox Automotive President Sandy Schwartz: “We have long admired the Dealertrack team and its highly respected brands.”
UPDATED: 6/15/15 4:18 pm ET -- adds stock close

Cox Automotive’s $4 billion blockbuster acquisition of Dealertrack Technologies brings together software giants with complementary strengths and little product overlap, the CEOs of the two companies said today.

Cox Automotive contributes to the planned merger such household names to dealers as Manheim, AutoTrader.com, Kelley Blue Book, vAuto, VinSolutions and Xtime, said Cox Automotive President Sandy Schwartz.

Publicly traded Dealertrack, meantime, is the established leader in lending software, digital marketing and retail tools that allow dealerships to offer vehicle shoppers the ability to complete most of a transaction online, said Dealertrack CEO Mark O'Neil.

“We are very complementary,” O'Neil said.

Cox Automotive is on pace for $5 billion in revenue in 2015. Dealertrack posted revenue of $253 million in its fiscal first quarter ended March 31.

Between the two companies, they offer software and digital marketing services for every department of the dealership.

Those vary from dealer management systems and customer relationship management to inventory management, service scheduling, finance and insurance, and third-party vehicle listing and merchandizing services.

Cox Automotive has agreed to pay $4 billion in cash for Dealertrack, or $63.25 per share. That’s a 59 percent premium over Dealertrack’s $39.85 per share closing price Friday. Dealertrack shares, as expected, skyrocketed on the news, trading up 58 percent to close at $62.98.

Schwartz said Dealertrack’s industry-leading positions in lending software and other services made the company “worth a little more” to Cox Automotive, a unit of privately held Cox Enterprises in Atlanta. Cox Enterprises, which operates cable and media companies, posted revenue last year of about $17 billion.

Dealertrack was behind the biggest acquisition last year among dealership software vendors when it paid $1 billion in cash and stock to buy digital marketing giant, Dealer.com.

The company is still absorbing that acquisition, Dealertrack said in its first-quarter earnings announcement last month. In the first quarter, Dealertrack’s net loss widened to $22.7 million, or 42 cents per share, compared with a net loss of $11.6 million, or 25 cents, in the year-earlier quarter.

O’Neil said he is excited about how the capabilities of Cox Automotive and Dealertrack unfurl in the coming months.

He said he is staying on as CEO of Dealertrack when it becomes a wholly owned subsidiary of Cox Automotive.

The deal is subject to antitrust approval by federal regulators. It is expected to close during the third quarter this year.

The acquisition is fully financed and is not subject to any financing conditions, the companies said.

James B. Treece contributed to this report.

You can reach David Barkholz at dbarkholz@crain.com -- Follow David on Twitter: @barkholzatan

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