Cazoo – the “Amazon of used cars” – comes to market

British online car retailer Cazoo will make its stockmarket debut in New York after a $7bn merger with a SPAC.

British online car retailer Cazoo will make its stockmarket debut in New York after it agreed to merge with special-purpose acquisition company (SPAC) Ajax I in a deal that values the company at $7bn, says Kalyeena Makortoff in The Guardian. The deal is a “blow” to the City and the London Stock Exchange, which reportedly “lobbied for the car retailer to list in its home market”. This also represents another victory for SPACs, which offer a “cheaper, quicker way for a private company to join a stockmarket”. 

The agreement will provide Cazoo, known as the “Amazon of used cars” with up to $1.6bn in funding, to “fuel its growth and expand its operations across Europe”. The deal is particularly good news for the Daily Mail and General Trust, says The Times. Its 20% stake in the company is worth around £1bn – “significantly more” than the £117m the Daily Mail originally invested. No wonder Daily Mail shares jumped by 9% on the news. The listing is expected to conclude by the third quarter of this year, but by then it could seem a bargain, says Tim Bradshaw in the Financial Times. Cazoo believes that Europe’s $500bn used car market is “ripe for disruption”, with customers becoming “more comfortable spending sums as [high] as its average selling price of £12,453 online”. 

Meanwhile, the greater population density compared with America could enable it to make earnings before interest, taxes, depreciation and amortisation margins of 8%-10% in the long term. Note that SoftBank-backed rival Auto1 is already a third above its initial public offering price after it went public in Frankfurt in early February to raise around €1.8bn.

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