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AutoTrader.com will announce later today it has signed an agreement to acquire Kelley Blue Book and its properties CDM Data and CDM Dealer Services, Dealer Communications has learned.
In exclusive interviews with Dealer Communications and the Wall Street Journal, AutoTrader President and CEO Chip Perry and Kelley Blue Book President and CEO Paul Johnson talked about the background and the strategy for the deal.
It’s the second major acquisition for AutoTrader in a little over a month, which announced in September it was buying vAuto, a used vehicle inventory management tool for dealers.
Kelley Blue Book, which was founded in 1926, is one of the oldest and most well known brand names in the automotive industry. It had come close to being sold a few times the last several years, including in 2008 when an earlier deal between AutoTrader and Kelley fell apart at the finish line primarily due to the collapse of the credit markets.
Kelley Blue Book retained the services of J.P. Morgan in July to again explore the option of selling the company. “Sometimes things come down to timing,” Johnson says. “People in the industry see the future as brighter and there is a resurgence in the M&A (mergers and acquisitions) markets.”
Several firms expressed interest and submitted bids to acquire Kelley. "KBB is one of the most attractive properties in years (for sale)," says Perry, who described the competition to buy it as "competitive."
AutoTrader, whose majority owner is Cox Enterprises Inc., announced in May that Providence Equity Partners had acquired a 25% stake in the company. At the time, Perry said the investment would “enable us to pursue the many organic growth opportunities, as well as strategic acquisitions, that will help improve the products and services we offer our customers.”
Terms of the AutoTrader-Kelley deal are not being released. However, industry insiders estimate the deal was in the neighborhood of $550 - $600 million. The deal is expected to close by the end of the year.
Both Kelley Blue Book and vAuto will operate as subsidiaries of AutoTrader. Johnson and Dale Pollak, vAuto’s founder and chairman, will report to Perry.
Except for additional products and services it will receive from AutoTrader, Perry says “almost everything Kelley does now is not going to change.”
However, Kelley, in a partnership with Vast Inc., had been working on a pay-per-performance classifieds lead model for new and used vehicles since the summer of 2009 after a partnership with AutoTrader ended prematurely.
Perry says Kelley’s model will move to more of a classified subscription model that is used by AutoTrader.
The challenge for AutoTrader will be to maintain Kelley’s brand as being the unbiased source for vehicle information and valuations. The plan is to enhance the consumer experience on KBB.com by custom fitting several of AutoTrader’s products for the site.
For example, classified listing model will play a much bigger role on KBB.com. In addition, KBB.com will also get AutoTrader’s Trade-In Marketplace, which provides consumers with an instant price for their vehicle redeemable at auto dealerships across the country participating in the program.
Perry says the partnership will enable dealers to access the Kelley audience.
When asked whether AutoTrader’s buying spree was done, Perry said the company is always on the lookout for opportunities, but that most of its growth would be from products developed internally.