September 30, 2015 — The Department of Justice yesterday approved Cox Automotive’s acquisition of Dealertrack provided Dealertrack completes the sale of its Inventory+ solution.
The DOJ is requiring the divestiture of Inventory+ because it believes allowing Cox to own both vAuto and Inventory+ would provide Cox with too much of that market , and hence, limit competition.
To read more about the acquisition:
Yesterday’s announcement, however, is a formality as Dealersocket announced a few weeks ago it is acquiring the inventory management solution for $55 million. Sources tell TBR the transfer of the solution to Dealersocket is scheduled for this evening (Sept. 30th).
Dealersocket’s majority owner is Vista Equity which recently announced it has agreed to buy Solera Holdings for $6.5 billion. Solera is the parent company of Autopoint (MPi), acquired in 2013 and 2014 and DMEautomotive, which it acquired earlier this year for $142 million.
Read our continuing analysis of what the acquisition for Solera means:
The purchase of Dealertrack was delayed twice as Cox resubmitted the required Hart-Scott-Rodino filing to provide the DOJ with more time to complete its antitrust review.
Meanwhile, Cox has extended its tender offer of approximately $4 billion for Dealertrack four times this summer to provide Dealertrack more time to get its shareholders to tender a majority of the company’s shares, according to the terms of the deal. At the time of last week’s extension, 39.5% of the shares had been tendered.
The deal is expected to close in October and likely will be announced once the required number of shares are tendered. Even if another extension or two are announced, it doesn’t mean the acquisition is in trouble. These types of deals sometimes take longer to complete than expected. It’s not unusual to see deals extended multiple times.
A purchase employing a tender offer is different than an acquisition requiring shareholder approval in that its shareholders agree to place their stocks in “tender, escrow, until the deal is completed, instead of voting on a proposed deal.
Until 2013, Delaware’s General Corporation Law required 90% of a company’s shares to be tendered for an acquisition to move forward. The law changed in August of 2013 to requiring a simple majority of the shares be tendered. Once the required number of shares are tendered, the acquiring company can buy up the remaining shares.
Tender offers do not require a shareholder vote, provide greater flexibility on the timing of the acquisition’s closing, while also providing protection against another buyer coming in and making a higher offer.