KAR Auction Services Inc. on Monday said that its auto-auction subsidiary, ADESA Inc., will expand its online auction operations by buying Openlane Inc., an Internet-based automotive remarketing company, for roughly $210 million in cash.
Peter Kelly will continue as Openlane's CEO and will report directly to KAR CEO Jim Hallett.
In a statement, Hallett said, "Openlane is a natural fit for the KAR family of companies as it extends our online product offerings, provides a complementary customer base and adds talented members to our management team."
He added, "I have known Peter and members of his management team for a number of years and have always believed that Openlane would be a good cultural fit with KAR. I look forward to Peter and his team contributing to KAR's success."
In the same statement, Kelly said, "I consider this a great combination that will significantly benefit our customers and the industry."
Taking business
Online used-vehicle auctions such as Openlane and SmartAuction, owned by Ally Financial, have increasingly siphoned business from brick-and-mortar auctions such as the much larger ADESA, as auction participants elect to buy or sell without the time or dollar cost of traveling.
Technology advances, Internet-savvy dealers, convenience and a desire to cut costs have helped elevate online wholesale used-vehicle purchases from novelty to necessity.
Remarketing sites list vehicles for sale with detailed condition reports and multiple photos detailing any damage. The vehicles generally are covered by the same arbitration policies that apply at physical auctions.
Generally, dealers pay the same fees to use an online channel that they would pay at a physical auction.
More than 300,000 vehicles
In 2011, KAR, of Carmel, Ind., expects that Openlane will generate about $100 million in revenue and sell more than 300,000 vehicles to automotive dealers through its online auction services platform.
ADESA will pay $210 million in cash, plus an increase for excess cash on Openlane's balance sheet at closing, for the online auction company.
The transaction's closing is subject to certain regulatory and other closing conditions. The company expects to finance the transaction with available cash and proceeds from its revolving credit facility.
Arlena Sawyers contributed to this report
