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Goldman Prepares To IPO Its Adesa Car Auction Portfolio Company And Pocket A Nice 3 Year Return
Don't say the market is unkind to Goldman. First the firm's employees are about to rake in all time record bonuses. Then, courtesy of of a rocking bear market rally, top-tick Goldman is about to get the hell out of dodge in another GS Capital Partners LBO, Adesa, basically a vehicle auction firm, which the firm bought in conjunction with Kelso in 2006. And who gets to pocket the underwriting fee? Why, Goldman. No way is the squid going to let any capital leave the firm. As for the company: prepare to own a 10x EV/EBITDA Craigslist knock off which will spew $100 million in free cash flow on a good year (and with consumers waiting for Cash for Clunkers 2 thru 100, don't expect a whole lot of car auction activity any time soon).
In an amended S-1 filed earlier, KAR Holdings (the HoldCo for Adesa) disclosed the details of its upcoming IPO. The company, with Goldman as lead left underwriter (and with upcoming Buy recommendations to follow the IPO courtesy of 10 co-managers to secure an even better price for Goldman to dump remaining shares), will sell 23 million shares between $15 and $17/share.
More details from the red's Use of Proceeds:
We intend to use $276.8 million of the net proceeds from this offering to repay and/or repurchase amounts under one or more of our senior subordinated notes, fixed senior notes and floating senior notes, which may include a tender offer for cash or the redemption of notes pursuant to the optional redemption provisions described under “Description of Certain Indebtedness — Senior Notes — Optional Redemption” and “Description of Certain Indebtedness — Senior Subordinated Notes — Optional Redemption.”
We also intend to use $64.1 million of the net proceeds from this offering, together with approximately $200 million of cash on hand, to repay $250 million of outstanding borrowings under our senior secured term loan, which matures on October 19, 2013, pay $3.6 million of senior secured term loan amendment fees and pay $10.5 million of termination fees to our Equity Sponsors in connection with the termination of our financial advisory agreements with each of them. (more cha-ching for Goldman).
The firm reports $383.7 million of LTM EBITDA. Pro Forma debt will be $2 billion and the market cap at the mid point of the offering range will be another $2 billion (based on 130 million shares), for roughly $4 billion in EV. So 10x+ EV/EBITDA for what is a essentially commodity service. Throw in $120 million in CapEx and $150 million in interest expense and you have a barely positive $100 million FCF company, garnering a ludicrous #Ref FCF multiple. Sounds like another brilliant idea out of 85 Broad. The cost: sponsors put in $1.1 billion in a mix of cash and equity, acquiring the company for $2.7 billion. Not a bad return for three years.
Congratulations Goldman on pulling another fast one out of where the sun don't shine. Better hope that IPO window doesn't close again. Oh wait, you are the market - how could we have doubted you.
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Any new installments coming forth on "The Man Who Bet The World"? aka Robert Rubin? I do so despise this beast and hope he one day gets what he so richly deserves.
Thank you for what you and your staff does so well every day.
In Soviet Russia, Goldman underwrites you!
Just stay off the trains...
Serious Folks...will u buy used cars from this fellas???
U must be kiddin' yaself!!
Manheim is the clear leader in that vertical. Just like The Squid to peddle junk.
I worked for ADESA as a temp for years. I gotta tell you, there is a auction every week with hundreds of cars, monthly with trucks and salvage/other auctions regularly.
If THEY cannot make a dollar, WE dont make anything and NO ONE gets a good deal on a vehicle of any kind. Always a certain percentage of inventory fails to be sold for a variety of pretty common reasons. They get resent to the next week's auction over and over until they either sell, become salvage or burn up/rust out and get sent to salvage and then resold.
My job as a Temp involved NO decisions whatsoever except: Stop and Go.
What is going to happen to nice ADESA when they are bought by some greedy revenue sucking entity intent on draining the dealers of their small profits and reducing the workforce until two workers can run 20 cars through in 4 hours work.
You tell me this. And I will show you hundreds of people, if not thousands that will have to look for work elsewhere.
Brothers and Sisters if we could just clasp tentacles and say together The Lloyd's Prayer
Our Chairman,
Who Art At Goldman,
Blankfein Be Thy Name.
The Rally's Come.
God's Work Be Done,
We Have No Fear Of Correction.
Give Us This Day Our Daily Gains,
And Bankrupt Our Nearest Competitors,
Just As You Taught Lehman And Bear A Lesson.
And Bring Us Not Under Indictment.
For Thine Is The Treasury,
The House And The Senate
Forever And Ever.
Goldman.
GS and BAC back in Aug 2008 took Britannia Bulk, a shipping company, public. The company was delisted from the stock exchange in Oct 2008 and in Nov 2008 filed for bankruptcy protection. These people are good at what they are doing.......
if the market is stupid enough to buy it, why would you not unload a risky bet?
Dont think you can take your anger out on GS for this one. Take it out on the stupid investors who are once again flush with cash chasing after ridiculously overprice assets.
I blame Goldman and there ilk for all of this mess, I will rejoice and crack open a bottle of champagne when they finally go bankrupt.
does anyvn have goldman steel report out yesterday?