British used car dealer Cazoo is going public in the US through a $ 7 billion SPAC deal

Cazoo founder and CEO Alex Chesterman.

Cazoo

LONDON – Cazoo announced Monday that it will go public through a merger with billionaire Daniel Och’s special purpose vehicle acquisition company.

Founded three years ago, Cazoo is a used car market based in the UK. The company sells and delivers its cars in the UK and continental Europe. Competitors range from Auto Trader to Carvana.

The company announced that it will partner with AJAX I, a U.S. blank check company founded by Och, in a deal valued at $ 7 billion. Founder Alex Chesterman will remain CEO of Cazoo after the SPAC merger, while Och will join the company’s board of directors.

“This announcement is another major milestone in our drive to transform the way people buy cars across Europe,” Chesterman said in a statement on Monday.

“We have created the most comprehensive and fully integrated offering in the largest retail sector that currently has very little digital penetration.”

What is a SPAC?

SPACs are shell companies founded with the sole aim of raising funds to acquire an existing private company so that the target company can bypass the traditional IPO process.

They have become a hot investment vehicle on Wall Street. SPACs in the US have raised $ 87.9 billion so far in 2021, surpassing total emissions for all of last year.

Once the deal is closed, Cazoo will be publicly traded on the New York Stock Exchange, dealing a blow to London aiming to attract higher-growth tech companies to its stock exchange.

So far, Europe has largely missed the SPAC boom. However, there are increasing signs of a trend across the continent. Amsterdam is attracting a number of SPAC IPOs, and London is trying to relax listing rules to accommodate US structured blank check companies.

Cazoo is expected to raise $ 1.6 billion from the deal with AJAX I, including $ 805 million in a SPAC cash trust and an additional $ 800 million from private investors.

The latter is led by the sponsors of AJAX and D1 Capital Partners, with additional support from Altimeter, funds managed by BlackRock, Morgan Stanley’s Counterpoint Global Fund, Fidelity and Abu Dhabi Sovereign Wealth Fund Mubadala.

Online shift

Cazoo aims to fill a void in the auto industry in the shape of an Amazon. Online sales still make up a tiny fraction of the total market globally, but they are increasing as e-commerce received a boost from the coronavirus pandemic.

Cazoo had annual sales of more than $ 600 million in the first quarter. In 2021, sales are expected to reach nearly $ 1 billion, quadrupling from the previous year. The company estimates the European used car market to be worth $ 700 billion, with only 2% of sales coming online.

Used car sales in particular have received a boost from the pandemic. Carvana, which runs a similar model to Cazoo, has seen its share price quintuple in the past 12 months, and investors consider it the “Amazon of Cars”.

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