CAR is about to spend $1.2bn expanding into the US, a move we like strategically but only time will tell if they’ve called the economic backdrop correctly. Ironically CAR expanded into Brazil in 2013 just before the country entered a recession although it should be noted the stock was trading well under $10 at the time – they’ve already experienced a recession and it actually went pretty well for them which probably bolsters their confidence today.
This time around CAR have taken their ownership of US business Trader Interactive from 49% to 100% at an additional cost of $US809mn, the deal:
- A $1.2bn fully underwritten 1 for 4.16 pro-rata accelerated non-renounceable entitlement offer at $17.75. i.e. a 14% discount to its last close. This means that existing shareholders can buy 1 new share for every 4.16 currently held at the discounted price. Non-renounceable means these rights cannot be sold.
MM likes the deal, all reads well, but CAR was trading under $17 in May and if we see another dip by the ASX through H2 a retest or break of its 2022 low is easy to comprehend.
MM likes CAR closer to $16
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