Cliff Banks - The Banks Report

Solera, CDK Deals Close

September 10, 2015 — Reports continue to trickle out of Wall Street about pending deals for Solera Holdings and CDK Global. An announcement for Solera could come as early as this week — and one potential buyer hints at an intriguing tie up with another big industry player. 
Reports in Bloomberg this week indicate an announcement regarding a sale of Solera Holdings could be made as soon as this week.
There are three buyers in the mix, reportedly. Private equity firms Thoma Bravo and Vista Equity along with a possible, (unnamed as of yet) strategic buyer.
The fact Vista Equity has emerged as a possible buyer is interesting. It also owns one of the leading CRM vendors in the space, Dealersocket — so really, Vista could be considered a strategic buyer also.
Just a recap, Solera owns AutoPoint and marketing firm DME Automotive, so there are intriguing possibilities of a possible tie up with Dealersocket.
The rumored price is a possible $53 a share, which works out to approximately $3.6 billion. Solera generated $1.1 billion revenue with adjusted earnings of $458 million in fiscal year 2015.
There is speculation that a third strategic buyer might be in the mix, however. It could be another player in the automotive insurance space or someone like IHS Automotive — this is our bet on who the “strategic” buyer is.
Meanwhile, CDK Global also reportedly is close to selecting a potential buyer and probably will begin reviewing bids this week.
Reports are that a group of banks have offered to finance up to $6 billion for a leveraged buy out of the company. Market cap for the company is more than $8 billion. We’ve speculated that a final price would be in the $9 billion range.
The report in Bloomberg indicates that CDK has limited the number of private equity firms it has allowed to review its numbers but is getting pressure from the hedge fund firms to open the process up to other buyers who have expressed interest. (We question that, only because it appears to us that the activist investors have much more of a say in what is happening with CDK).
We’ll provide more analysis as details become available.
Meanwhile, here’s analysis we wrote on August 22 about CDK, Solera and Dealertrack being acquired — Three Monster Deals Pending in Automotive Retail.

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