Carsome open to other strategic M&A deals beyond privatising iCar for US$200m

MALAYSIAN startup Carsome is not only pursuing a US$200 million takeover of Australia-listed iCar Asia, but is also staying open to other acquisition opportunities to complete its value chain of services, chief executive Eric Cheng told The Business Times.

“Organically, we’ve been growing very well as a business. But at the same time, we are looking at more opportunities. The way we think about this is that we want to be part of the journey as you own a car – not just limited to buying and selling but also after-sales support, financing and insurance,” he said.

On Tuesday, Carsome announced that it has teamed up with Catcha Group – an investment company led by iCar Asia founders Patrick Grove and Luke Elliott – to fully acquire and privatise iCar Asia in a US$200 million deal.

Founded in 2015, Carsome operates a platform for buying and selling used cars in Malaysia, Indonesia, Thailand and Singapore. iCar Asia is present in the same markets, offering automotive listings and content. The company listed on the ASX in 2012.

As a first step in the takeover, Carsome has entered an agreement to acquire 19.9 per cent of iCar Asia via a share swap with Catcha Group.

For the next step, both Carsome and Catcha have made a joint proposal to the independent directors of iCar Asia to acquire the remaining 80.1 per cent.

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The offer price is A$0.55 – an 83.3 per cent premium to iCar Asia’s closing price of A$0.30 on Friday. Following the disclosure, iCar Asia’s share price rallied 60 per cent to close at A$0.48 on Tuesday.

The US$200 million price tag is about 19 times iCar Asia’s topline of A$14.1 million for FY2020. The company recorded a net loss of A$10.7 million for that year.

Carsome’s latest financials are not available, but according to data platform VentureCap Insights, its Malaysian entity posted a US$206.8 million topline in 2019, with about US$195 million in cost of sales. Its net loss stood at US$14.3 million.

Hamish Stone, chief executive and managing director of iCar Asia, said that both sides are engaging on the indicative proposal. iCar Asia is also considering a takeover proposal from Autohome, a Chinese car platform, at A$0.50 per share.

Meanwhile, Carsome is reportedly mulling a US listing at a US$2 billion valuation, either via a conventional initial public offering or a merger with a special purpose acquisition company. It is also said to be conducting a pre-IPO fundraise, targeted at US$150 million, according to media reports in June.

Mr Cheng confirmed that the company has IPO ambitions but said that it does not have a “strict timeline”.

He also said that Carsome has attained unicorn status, but declined to share details of the funding that would have launched its valuation past US$1 billion. According to VentureCap Insights, Carsome was valued at US$250 million last year after a US$30 million Series D round.

“In between then and now, we did a round, so the valuation has come up quite a bit,” Mr Cheng said, without disclosing specifics.

If Carsome’s takeover of iCar Asia goes through, a new combined entity, Carsome Group, will be formed. The founders will be Mr Cheng, Mr Grove and Carsome’s chief operating officer Teoh Jiun Ee. The combined group will boast a headcount of about 2,000 – with some 1,700 from Carsome.

Mr Grove reckons that Carsome’s proposed takeover is synergistic. “We are not two competitors coming together; we are both in the ecosystem but serving different parts. iCar is focused on content and listings, whereas Carsome is very focused on e-commerce and transactions,” he said. “It’s a perfect marriage.”