(Adds boost for investor DMGT in paragraph 6)
By Joshua Franklin
March 29 (Reuters) - British online car seller Cazoo
Holdings Limited has agreed to go public in New York through a
merger with AJAX I Acquisition Corp, a blank-check
acquisition company led by billionaire U.S. investor Dan Och, it
said on Monday.
The deal with AJAX I, a special purpose acquisition company
(SPAC) listed on the New York Stock Exchange, values Cazoo at $7
billion, including debt, more than double the $2.6 billion
valuation in its private funding round in October.
It underscores how vehicle sales have shifted to online
platforms during the coronavirus pandemic as car buyers practice
social distancing.
"We think, in markets like ours, that shift is permanent
because consumers are discovering new ways to transact which are
better," Cazoo Chief Executive Alex Chesterman said in an
interview.
Chesterman founded London-based Cazoo in 2018. The company
offers online purchases and delivery of used vehicles in Britain
and continental Europe, operating a similar model to U.S. peer
Carvana Co.
The news boosted shares in British newspaper publisher Daily
Mail and General Trust Plc, which has a stake of
around 20% in the business. DMGT said it expects to receive cash
and shares valued at about $1.35 billion.
Och underlined the potential to expand the business.
"The European used car market is (worth) over $600 billion
annually. Digital penetration is approximately 1%-2%, we think
that's going to grow dramatically. That creates the
opportunity," Och said.
Carvana's stock is up more than 400% in the last year, with
a market capitalization of $44.6 billion.
Shares of rival U.S. car seller Vroom Inc are up 68%
since its IPO in July. However, CarLotz Inc, a U.S.
consignment store for used vehicles, completed a SPAC merger in
July and its shares currently trade at $7.70 apiece, below the
$10 SPAC IPO price.
The merger will provide Cazoo with up to $1.6 billion in new
funding, which it plans to spend on growing its brand and
infrastructure, and expanding into new markets such as Italy and
Spain.
"It gives us enough capital to take us to profitability and
beyond," Chesterman said.
The funds are from the $805 million which AJAX I raised in
October in an initial public offering (IPO) and $800 million
through a private investment in public equity (PIPE).
Investors in the PIPE include D1 Capital Partners, BlackRock
and Fidelity Management, with $200 million of the PIPE financing
also coming form AJAX's team including Och and Instagram
co-founder Kevin Systrom. The PIPE orderbook was oversubscribed,
Och said.
SPACs like Ajax raise funds in an IPO with the aim of
merging with a private company, which then becomes public as
result of the merger. It is an alternative to a traditional IPO.
(Reporting by Joshua Franklin in Boston; Editing by Daniel
Wallis and David Evans)
