ADESA signs agreement to acquire OPENLANE

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KAR Auction Services, Inc. said late Monday that its subsidiary, ADESA, Inc., has signed a definitive agreement to acquire the equity of OPENLANE, Inc.

The deal will see KAR pay $210 million in cash, plus an increase for excess cash on OPENLANE’s balance sheet at closing.

The transaction’s closing is subject to certain regulatory and other closing conditions. The company expects to finance the transaction with available cash and proceeds from its revolving credit facility.

Peter Kelly will continue as OPENLANE’s CEO and report directly to KAR’s CEO, Jim Hallett.

In 2011, KAR expects that OPENLANE will generate approximately $100 million in revenue and sell over 300,000 vehicles to automotive dealers through its online auction services platform.

After giving pro forma effect to this acquisition and the elimination of certain corporate costs, KAR expects OPENLANE’s pro forma Adjusted EBITDA in 2011 to be approximately $13 million.

In a statement published on its website, KAR noted it anticipates OPENLANE will contribute “$20 to $25 million of Adjusted EBITDA in 2012,” which reflects synergies expected to be realized upon the integration of the businesses.

In addition, KAR expects OPENLANE’s Adjusted EBITDA to further improve following completion of all integration activities in 2013.

Commenting on the acquisition, Jim Hallett characterized OPENLANE as a “natural fit” for the KAR family of companies as it extends online product offerings, provides a complementary customer base and adds talented members to our management team.

“Sellers and purchasers of vehicles continue to increase their use of online remarketing platforms, and we believe that enhancing our existing suite of online services and products will further support KAR’s objective of expanding our addressable market to capture transactions that currently take place outside the traditional wholesale auction channel,” he said.

“This combination will allow ADESA to broaden its comprehensive end-to-end solutions for the vehicle remarketing industry and will provide opportunities for our sister companies, Insurance Auto Auctions and AFC.”

Commenting on behalf of OPENLANE, Peter Kelly stated, “I consider this a great combination that will significantly benefit our customers and the industry. Joining KAR will provide OPENLANE with the resources to accelerate the execution of our strategy and to deliver innovative remarketing solutions to the industry. I am looking forward to working with Jim and joining the KAR management team.”

Hallett continued, “I have known Peter and members of his management team for a number of years and have always believed that OPENLANE would be a good cultural fit with KAR. I look forward to Peter and his team contributing to KAR’s success.”

KAR Auction Services is the holding company for ADESA, Inc. At present time, ADESA runs wholesale used vehicle auctions across North America with 70 used vehicle sites. Insurance Auto Auctions, Inc., a leading salvage auto auction company whose operations span North America with 159 sites and Automotive Finance Corporation, a leading provider of floorplan financing to independent and franchised used vehicle dealers with 89 sites across North America.