By Dhirendra Tripathi
Investing.com – KAR Global (NYSE:KAR) stock climbed 68% in premarket Friday after selling its vehicle auction business in the U.S. for $2.2 billion to Carvana Co (NYSE:CVNA).
ADESA U.S., a wholly-owned subsidiary of KAR Global, is the second largest provider of wholesale vehicle auction solutions in the U.S. with 56 sites. It brought $800 million in revenue and over $100 million EBITDA in 2021.
Carvana was an unexpected winner last year as the pandemic-induced shortage of new vehicles made potential buyers prefer used cars. Low interest rates and high prices of new vehicles were other motivations fueling purchases of used vehicles.
As the pandemic wanes and shortages ease, Carvana is looking at new business to keep its growth going.
"Carvana and ADESA U.S.'s footprints are highly complementary and combining them extends the collective reach of the two businesses," the used-car seller said.
It added that when fully utilized, ADESA's reconditioning operations can add about 2 million units to its annual production.
Carvana has secured the financing for the deal from J.P. Morgan and Citi.
Carvana stock was up 6% premarket. It released its fourth quarter numbers Thursday. Revenue more than doubled to $3.75 billion.