Digital automotive marketplace TrueCar is selling its data analytics subsidiary ALG for $135 million to consumer intelligence company J.D. Power after multiple parties expressed interest in the brand during the past six months, TrueCar spokeswoman Shadee Malekafzali told Auto Finance News
The transaction, which was passed unanimously through the TrueCar Board of Directors, is expected to close by the end of the year. All 40 ALG employees will then join J.D. Power, according to a J.D. Power statement released yesterday.
“After careful consideration of a variety of options and potential partners, it became clear that a sale of ALG to J.D. Power, with its breadth of complementary services, represented the best possible path forward for all parties,” said Mike Darrow, president and chief executive of TrueCar, in a statement.
The deal will include an up-front cash payment of $112.5 million with up to $22.5 million more in deferred settlements in the next three years, according to a TrueCar statement. Upcoming payments are subject to change, as they are based on ALG revenue. TrueCar will dedicate the income to its new $75 million share repurchase program, as well as securing its balance sheet and preserving its “strategic flexibility,” according to the statement.
The sale comes as TrueCar pivots to focus on its core business: the digital auto marketplace, Malekafzali said. “We’re in the process of transforming our marketplace into a comprehensive and flexible end-to-end car buying solution that allows consumers to build as much or as little of their deal online as fits their preferences, working with our retailer partners along the way.”
ALG, which was established in 1964, will enhance J.D. Power’s capabilities to accurately predict residual values going forward, according to the J.D. Power statement, as its historical data will “allow for even more accurate end-of-lease forecasting capabilities.”
TrueCar’s restructuring is designed to point the company in the right direction, said B. Riley analyst Lee Krowl. “Between the cost cuts, improving traffic, sale of ALG and share repurchase, I think management is taking all the steps to drive shareholder value while also positioning the company to benefit from the industry’s shift to more digital retailing.”
TrueCar, however, is unable to provide any additional commentary about contract specifics until regulatory review and approval processes are completed, Malekafzali said. Until the deal closes, ALG and J.D. Power will conduct “business as usual,” according to a J.D. Power spokesperson. J.D. Power was unable to provide additional details about the acquisition due to regulatory requirements.
Shares of TrueCar [Nasdaq: TRUE] were trading at $5.55 at 3:03 p.m. EST, up 29.30% from market open. TrueCar has a market capitalization of $595.04 million.
— Additional reporting by Amanda Harris
Originally published on Auto Finance News