Online used-vehicle retailer Carvana, pressed in recent months to expand its vehicle reconditioning capacity, said Thursday it plans to buy the ADESA U.S. physical wholesale auction business from KAR Global Inc. for $2.2 billion in cash.
The transaction would give Carvana exclusive use of the ADESA.com marketplace in the U.S., plus all auction sales, operations and employees at ADESA’s 56 vehicle logistics centers in the country. It also would help expand the online retailer’s customer reach and increase its production capacity by an estimated 2 million vehicles per year, Carvana CEO Ernie Garcia said.
The deal, which is expected to close in the second quarter of 2022, “substantially improves” the span of Carvana’s logistics network, Garcia said late Thursday on a conference call after the retailer announced a $182 million net loss for the fourth quarter even as quarterly and annual revenue soared.
“We will move from currently having inspection centers within 200 miles of 56 percent of the U.S. population to eventually being within 200 miles of 94 percent of the U.S. population,” Garcia said. “Demonstrating the quality of these locations, we will move from being within 50 miles of 16 percent of the U.S. population to being within 50 miles of 58 percent of the population.”
That will slash shipping times to Carvana customers, Garcia said.
Carvana opened its 15th inspection and reconditioning center at the beginning of 2022, which brought its total production capacity to 880,000 vehicles, Garcia said. Production for the retailer means getting used cars and trucks sale-ready: receiving, inspecting and reconditioning them.
The company plans to open six additional centers by the end of the year. Five will open as originally scheduled, but the timetable for the opening of the sixth could change because of the ADESA transaction, Garcia said.
Carvana said it will keep the ADESA brand name for the wholesale auction business. Garcia praised ADESA — a longtime giant in the wholesale vehicle auction business.
“ADESA earned its place as a respected brand in our industry because of its dedicated team and robust operations,” he said in a news release. “We have long admired ADESA, having come to appreciate their approach as a customer for many years. We look forward to joining forces and continuing on the path of delivering the best customer offering for both retail and wholesale customers.”
KAR Global shares skyrocketed on the news, rising 38 percent to $18.93 in morning trading on Friday.
Carvana shares initially fell in after-hours trading on Thursday, but rallied up 2.4 percent to $129 in early trading on Friday.