TDR Capital and BCA Marketplace PLC Agree On Around £2 Billion Acquisition Deal

BCA Marketplace Plc provides vehicle purchase services, headquartered in the United Kingdom. The company operates through three divisions: vehicle re-marketing division, vehicle buying division and automotive division. The vehicle re-marketing division facilitates the exchange of used vehicles between vendors and buyers through both physical and online auctions. The vehicle buying division purchases used vehicles directly from the public in the UK and the Netherlands, which it then disposes of through the vehicle re-marketing division. The automotive division provides a variety of services for new vehicles from the post of entry. The company operates over 200 physical locations in the UK, Brazil, Denmark, France, Germany, the Netherlands, Italy, Portugal, Spain, Sweden, Poland and Switzerland.

TDR Capital is a private equity company. It has agreed to buy WeBuyAnyCar.com owner BCA Marketplace company in a deal consideration of around GBP 2 billion.

As a boost to Neil Woodford’s flagship fund, the confirmation of the deal will come, which froze approximately £3.7 billion of investor money this month amid liquidity concerns and is a major shareholder in BCA Marketplace PLC.

On 26th June 2019, the company said that the cash offer per share of 243 pence was in line as expected.

The offer values the company’s share capital at approximately £1.9 billion, a premium of around 25 per cent to the value of the shares before the buyout offer was announced.

The agreement comes as the British car industry faces deep uncertainty, with Brexit posing a threat to its just-in-time supply chains that rely heavily on frictionless trade with the EU. The industry’s trade body this week warned a no-deal Brexit would deliver a knockout blow to the competitiveness of Britain’s automotive sector. The company Chief Executive (CEO), Avril Palmer-Baunack, who likes to describe the business as the Amazon of cars, has a longstanding relationship with Neil Woodford.

According to accounts filed to Companies House, the company sold 1 million cars for the first-time last year, representing a 6.5 per cent surge from 2017, after a third consecutive year of strong growth.

TDR Capital said it planned to review the company’s operations after the deal completion and all the non-executive members of the BCA Board would resign. TDR Capital believes that the company is well placed to benefit from an additional increase in the automotive services industry.

According to the deal, TDR Capital is scheduling to ride the growth of the business with a possible listing or sale to a peer private equity firm in around five years. The TDR capital said that they will not comment on this portion.

Financial Highlights (FY2019, £ million)

(Source: Preliminary Results, Company Filling, LSE)

The UK vehicle remarketing division revenue surged by 32 per cent to £1,242.5 million as compared with the financial year 2018 of £941.4 million. In the International Vehicle Remarketing business, revenue climbed by 19.4 per cent to £184.3 million against the £154.3 million in the financial year 2018. In the Vehicle Buying division, revenue rose by 24.4 per cent to £1,219.8 million as compared to £980.5 million in FY18. In the Automotive Services division, revenue increased to £381.4 million as compared with the financial year 2018 of £355.3 million.

The company’s reported revenue increased from £2,431.5 million in FY18 to £3,028 million in FY19. The revenue was increased because of the result of growth over the business and the United Kingdom Vehicle Buying and Vehicle Remarketing both exceeded £1 billion of revenue. Around 1 million vehicles had been sold in United Kingdom Vehicle Remarketing for the 2nd successive year. BCA Marketplace PLC full year accelerated volume increased by 5.8 per cent to 18.7 per cent as compared with the financial year of 2018 of 12.9 per cent. The continued growth of data, digital and valuation products rose by 17 per cent in BCA Dealer Pro registered United Kingdom dealers. Growth was 23.2 per cent in global cross-border revenues with surged adoption of the company Europe Transport. The company Partner Finance offered dealer capital of around £1 billion for vehicle procurements in the financial year 2019. The group purchased 13.2 million of its shares at £1.90 for a total amount of £25.2 million (including stamp duty and commission Reserve Tax).

Adjusted EBITDA increased by 7.8 per cent to £171.9 million as compared with the financial year 2018 of £159.5 million. Operating profit stood at £100.2 million in the financial year of 2019 as compared with the previous financial year data of £87.6 million in the financial year of 2018. Net Debt rose by £40.3 million to £231.9 million in the financial year 2019 as compared with the financial year 2018 data of £191.6 million. Adjusted diluted earnings per share climbed by 13.2 per cent to 12.90 pence against the 11.40 pence in the financial year 2018. Diluted earnings per share stood at 8.60 pence, an increase of 22.9 per cent as compared with the financial year of 2018 data of 7.00 pence. Full year dividend per share increased by 12.9 per cent to 9.65 pence as compared with the financial year 2018 of 8.55 pence. The board proposed the final dividend per share of 6.65 pence and will be paid by the end of September 2019.

Share Price Performance

Daily price chart (as on June 27, 2019), before the market close. (Source: Thomson Reuters).

At the time of writing (before the market close, at 4:00 PM GMT), shares of the BCA Marketplace PLC were quoting at GBX 241.6 and increased by 0.25 per cent against the previous day close. The outstanding market capitalisation of the company stood at around £1.89 billion, with a dividend yield of 5.52 per cent, which ranks it among the large-cap companies listed on the London Stock Exchange and a constituent of FTSE 250, FTSE 350, and FTSE All-Share.

52w H/L price range

In the past year, shares of the BCA Marketplace PLC have registered a 52w high of GBX 243.10 (as on August-31-2018) and a 52w low of GBX 176.70 (June-03-2019), and at the current trading level, shares were quoting around 0.62 per cent lower against the 52w high price level and approximately 36.73 per cent above the 52w low price level.

Volume Standpoint

The 5-day average daily trading volume in the stock stood at 22,257,699.60, which was around 363.19 per cent above the 30-day average daily volume of 4,805,306.00 traded on the London Stock Exchange.

Simple Moving Average (SMA)

From the simple moving average standpoint, shares of the BCA Marketplace PLC were trading considerably above its 200-day, 60-day and 30-day simple moving average prices, a technical measure that indicates a long-term uptrend in the stock.

Price Performance (%)

On a YoY basis, the stock of BCA Marketplace PLC has delivered a price return of positive 12.35 per cent, on a year-to-date basis, it was up by 9.55 per cent, and in the past three months, the stock has increased by approximately 23.34 per cent. Also, the stock was up by approximately 23.84 per cent in the past five trading sessions.

Relative Multiple

On the trailing twelve months basis, the company’s EV/EBITDA multiple stood at 12.9x as compared to the industry median 7.9x. Similarly, P/E multiple of the group stood at 18.3x as compared to the industry median of 10.1x, which reflects the company is overvalued when compared to its peers.

Relative Strength Index (RSI)

From the RSI standpoint, the 30-day, 14-day, and 9-day relative strength of the stock stood at 69.47, 79.65 and 84.57, and the stock has entered an overbought zone.

RSI is a leading technical indicator that measures recent price change magnitude to estimate the overbought or oversold direction in the stock price or other asset classes. If an RSI of an asset class stood at 70 or above, it indicates the stock is hovering in an overbought zone and could pull-back or correct in near-term and in case RSI quoting at 30 or below, it reflects an oversold condition in the asset.

Some Key risks are Economic and geopolitical environment, strategic initiatives, competition, IT systems and information security, intellectual property relating to the online auction system, financial & liquidity risks, regulation & legislation and physical damage.

BCA, which sold more than a million cars last year, helpfully and succinctly explains the appeal of the deal to shareholders such as Woodford, who needs to liquidate holdings to pay shareholders who want to exit his gated flagship fund.

The company’s strong leadership position within the UK and Europe, along with its well-defined strategy, should support current rates of revenue growth. The company had shown good financial performance in the current financial year and most of the revenue was generated from its vehicle remarketing division and vehicle buying division. The current market sentiment in relation to the company is fair with favourable fundamental indicators, positive estimates and valuation. As the company is planning to expand into Europe, a hard Brexit deal could increase the operational expenditure for doing business abroad and dampen the proceedings.