Automotive News: KAR Global finalizes sale of ADESA U.S. to Carvana

KAR Global said Tuesday it has completed the sale of its ADESA U.S. auction unit to Carvana Co.

The deal will allow KAR to focus on its online dealer-to-dealer businesses and enable Carvana to gradually boost the number of cars and trucks it can get ready for sale each year.

Carvana purchased ADESA U.S. from KAR Global for $2.2 billion. KAR, a Carmel, Ind.-based wholesale auctions provider, agreed to sell the physical auction unit in late February.

The deal hands Carvana the keys to 56 ADESA sites across the U.S., totaling about 6.5 million square feet of buildings on more than 4,000 acres. It also gives Carvana all staff and operations at the 56 locations, plus sole use of the marketplace in the U.S.

“We aim to use this ADESA U.S. alignment to both improve the experiences of the ADESA U.S. physical auction customers and to focus on significant and sustainable efficiencies, and unit economic improvements, for Carvana to catapult back into rapid profitable growth as the industry inevitably rebounds,” Carvana CEO Ernie Garcia said in a news release.

“We believe the future is digital, and the channel shift towards digital across our industry is gaining momentum,” KAR Global CEO Peter Kelly said in a news release. “KAR is now better positioned than ever to lead this evolution and capture the broad opportunities ahead.”

Carvana shares slipped 16.6 percent on Monday, but were rising 0.6 percent to $39.02 in premarket trading on Tuesday.

The deal’s closure comes just weeks after Carvana reported a disappointing first quarter, in which the company recorded a net loss of $506 million and retailed fewer vehicles than it had planned for because of increasing interest rates, dwindling consumer confidence and other snafus that are being felt throughout the industry.

Carvana’s next steps

Carvana said fully utilizing the 56 sites will give it the ability to recondition up to 2 million vehicles per year.

At the end of the first quarter, the company reported it was capable of reconditioning 1 million vehicles through its own 17 inspection and reconditioning centers. Carvana expects its reconditioning capacity to stand at 1.4 million at the end of 2022.

The initial announcement that Carvana would acquire ADESA U.S. drew some concerns from automakers and dealers. Some reconsidered or cut their ties to the auction house.

KAR’s next steps

As part of its online-centric maneuver, KAR will keep operating Openlane, the platform Kelly founded in 1999 that supports programs representing about 80 percent of North America’s off-lease inventory. KAR acquired Openlane in 2011.

The company also hopes the absence of the ADESA U.S physical auction space will allow it to focus on BacklotCars, Carwave and TradeRev, its burgeoning digital dealer-to-dealer platforms.

KAR keeps its ADESA Canada, ADESA U.K. and ADESA Europe units, plus all affiliated inspections, transportation and other services brands. It also retains AFC, its subsidiary that provides dealers with floorplan solutions.

KAR said it will provide more insight into its digital strategy during an analyst day update call that it may schedule for June.

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