Mr McIntyre said the strategic acquisition would lead to cost synergies and revenue opportunities in the US non-automotive listings market, which is 16 times bigger than the same market in Australia.
Trader Interactive operates a group of branded marketplaces in the US, providing digital marketing solutions and services across the recreational vehicle, power sports, commercial truck and equipment industries.
The company provided a trading update on Monday, estimating its adjusted revenue for the 2022 financial year will be 16 per cent higher than last year and its adjusted net profit after tax will be up 27 to 28 per cent.
Carsales is aiming to raise $1.2 billion to fund the acquisition by issuing 68 million new shares at $17.75, a 14.5 per cent discount from Friday’s closing price of $20.76.
It will also seek to upsize its debt facilities from $900 million to $1.4 billion to replace the existing $562 million debt facility at Trader Interactive.
The deal values Trader Interactive at $US1.9 billion, representing an adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) multiple of 21.3.
That is a lower multiple than the 26.5 times EBITDA multiple it paid for its initial 49 per cent stake in May last year.
“What we’re paying is a price that we think reflects value for shareholders and current market conditions,” said William Elliott, Carsales chief financial officer.
“As a multiple, it is lower than what we paid for the first tranche and it obviously includes us taking control, so from that perspective we think it is reasonable.”
Mr McIntyre said the original deal had been structured with a call option to allow Carsales to get to know the Trader Interactive business and eventually move into 100 per cent ownership.
“We’ve had the opportunity to get to know the CEO of the business, Lori Stacy. and her executive team and the Trader business more broadly, and we’ve been we’ve been super impressed with them,” Mr McIntyre said.
“We knew it was a great business when we made our initial investment, but we’re even clearer now that the quality of the businesses and the quality of the team is there and the scale of the opportunities are there.”
Mr McIntyre said the deal was part of Carsales’ long-term strategy to build scale through international acquisitions.
It follows a similar path in its acquisition of South Korea’s Encar.com in November 2017 and its 30 per cent acquisition of Brazil’s Web Motors in 2014.
Mr McIntyre described Trader Interactive as being in a similar position to Carsales 10 years ago, giving it a road map to improve its products and continue to grow the business.
“We have strong near-term growth expectations and we want to ensure that the Carsales shareholders receive the full benefit of those synergies … as opposed to 49 per cent,” he said.