KAR purchase has tax benefits

Article Excerpt

KAR AUCTION SERVICES INC. $16 is a buy. The company (New York symbol KAR; Manufacturing & Industry sector; Shares outstanding: 119.2 million; Market cap: $1.9 billion; No dividends paid; Takeover Target Rating: Medium; www.karauctionservices.com) sells used and salvaged vehicles at physical auction sites in the U.S., Canada, Mexico, Europe, and the U.K. On June 28, 2019, the company completed its spinoff of IAA Inc. (New York symbol IAA), which salvages damaged vehicles and sells them through online auctions. KAR shareholders received one share of IAA stock for every share they held in its parent company. KAR will now pay $450 million for Carwave Holdings LLC. California-based Carwave’s dealer-to-dealer online wholesale marketplace lets dealers take trade-ins and aged frontline inventory and quickly sell them wholesale, while also sourcing vehicles to purchase. In the past year, Carwave has sold more than 100,000 vehicles. The transaction, which is expected to close by the end of 2021, also provides KAR with $400 million in future tax deductions…