Cazoo has confirmed it will list on the New York Stock Exchange in a deal that it hopes values the online used car dealership at $7bn (£5bn).
Announcing the move today, the used car dealership says it has grown ‘300 per cent’ year on year and expects revenues for 2021 to hit $1bn (£726m).
Cazoo has signed an agreement to merge with Ajax, a publicly traded special purpose acquisition company, or SPAC.
Ajax is worth $805m and was founded by US investor Dan Och in partnership with Glenn Fuhrman as well as advisors including the founders of Chipotle and Instagram.
In the announcement, Cazoo claims to be the UK’s ‘leading’ online used car retailer and says it has achieved ‘an annual run rate’ of £435m revenue in the first quarter of 2021. Car Dealer has asked for confirmation of what these figures include.
In the last accounts available, Cazoo made a £19m loss for 2019.
The online car dealer says the deal will help fund its ‘mission to continue to transform the car buying experience across Europe’ as it aims to use the proceeds to build its brand and infrastructure.
Boss Alex Chesterman said: ‘This announcement is another major milestone in our continued drive to transform the way people buy cars across Europe.
‘We have created the most comprehensive and fully integrated offering in the largest retail sector which currently has very low digital penetration.
‘This deal will provide us with almost $1bn of further funds to fuel our growth and I am delighted to be partnering with Dan and his team at Ajax to rapidly expand and deliver the best car buying experience to consumers across Europe.’
Cazoo has told investors that the UK and European used car markets are ‘highly fragmented’ and ‘ripe for digital disruption’.
‘No dealer group has more than a five per cent market share,’ says Cazoo.
The company says it has enjoyed ‘hyper growth’ with 20,000 cars so far delivered in the UK and that the market is ‘increasingly adopting online buying’.
It fails to mention that much of its success in the last year can be directly attributed to three lockdowns which have forced consumers to buy purely online as they’re not allowed to visit car dealerships.
Car dealers have also upped their game significantly in the last year with their online models and many are now selling more cars than they did in previous years via online click-and-collect models alone.
Mike Allen, motor industry analyst at Zeus Capital, told Car Dealer: ‘These are interesting times for Cazoo and indeed implications for the sector.
‘As dealer models have proven their flexibility during this pandemic, the propositions offered by Cazoo and the traditional dealer are closer than many investors might perceive.
‘One important point to consider when looking at the valuation is the SPAC structure demands high levels of capital to be deployed very quickly in high-return areas to be effective. This is a different asset class to conventional equity investment but also has a different risk profile.’
Mike Jones, compiler of the Car Dealer Top 100 list of most profitable car dealers and executive chairman of ASE Global, added: ‘While the valuation is eye watering for a business still in its infancy and yet to turn a profit, it shows the belief amongst investors that the used car market is ripe for online disruption.
‘The market size is undeniably sizeable, however over the past two years many established motor retailers have made huge strides in their online presence and ease of use for customers.
‘As we emerge from the pandemic and reopen the showrooms we will all be watching closely the extent to which customers are happy to continue with a purely online model and the number that revert back to the alternative omnichannel experience.
‘As the Cazoo valuation shows the prize for the businesses who rise to dominate the market is huge.’
Chesterman is set to cash in as part of the IPO as well as shareholders the Daily Mail and General Trust. Reports suggest both could make more than £1bn from the listing.
Today’s announcement adds: ‘Assuming no redemptions and after accounting for cash proceeds payable to the existing Cazoo shareholders, the transaction will deliver approximately $1bn in gross cash proceeds to the combined company, enabling Cazoo to further build out its brand and infrastructure and supporting Cazoo’s mission to continue to transform the car buying experience across Europe.’
Credit Suisse, Goldman Sachs and Numis are advising Cazoo on the deal.
Dan Och, founder of Ajax said: ‘We are incredibly excited to have the opportunity to partner with Alex and the exceptional team at Cazoo.
‘Alex has proven to be one of Europe’s most successful serial entrepreneurs and we are proud to be supporting the growth of this world-class team, brand and platform.
‘With their constant focus on innovation, data and customer satisfaction, I have no doubt that Cazoo is going to continue to lead the way in this massive, untapped market opportunity and am looking forward to joining the board of Cazoo and working with Alex and his team.’
Click on the date to read the full story
Feb 2021 – Cazoo acquires German subscription service Cluno and plots European expansion. As part of the deal it says it will be moving its HQ to Germany.
Feb 2021 – Reports suggest Cazoo founder Alex Chesterman cashed out £100m of shares in the last round of fundraising which was announced in October 2020. Firm refuses to comment.
Feb 2021 – Rumours surface that Cazoo is planning a stock market flotation in New York at a potential valuation of £5bn. The figures baffle industry experts.
Feb 2021 – Cazoo snaps up Smart Fleet Solutions, a vehicle reconditioning and storage specialist which operates from four sites and has 500 staff.
Dec 2020 – Cazoo buys car subscription service Drover for an undisclosed sum with a plan to offer subscriptions to the used cars on its platform.
Nov 2020 – Founder Alex Chesterman takes a swipe at car dealers saying the current sales model is ‘flawed at every level’ in an interview with The Times.
Oct 2020 – Cazoo posts £19m loss for first year of business according to accounts filed at Companies House.
Oct 2020 – Cazoo announces a further £240m in funding taking the total raised to £450m at a valuation of £2bn for the online retailer.
Sept 2020 – Cazoo accused of online-only U-turn as it begins turning former Imperial sites into ‘Customer Centres’ and plans many more around the country.
July 2020 – Car Dealer breaks the story Cazoo is about to buy Imperial Car Supermarkets. A day after our story breaks, the firm reveals the deal has been done.
June 2020 –Cazoo signs deal to become shirt sponsors of Everton in a deal rumoured to be worth nearly £10m. It soon follows it up with a similar deal with Aston Villa.
March 2020 – Cazoo announces another £100m in funding, taking the total raised to £180m. DMG Ventures, the venture capital arm of the Daily Mail, piles in as part of the fundraising.
February 2020 – Leaked Cazoo investor pack reveals used car dealer plans to sell 217,000 used cars a year by 2025. Predicts it will lose £70m in first three years.
December 2019 – Cazoo launches and announces a total of £80m in funding from venture capitalists General Catalyst and Mubadala Capital.