J.D. Power Continues Acquisitions - Buys ALG From TrueCar

Editor's Note. It seems to me that with this purchase along with other recent e-commerce and auto data site purchases that, J.D. Power is bulking for a move to automotive retail e commerce, and will soon go head to head with Cars.com, Edmunds, Auto Trader, TrueCar, Car Guru (which generates 15% of revenue from advertising) and others in the e-commerce lead gen space. Is this change of direction an indication that Power will give up their reputation for unbiased research awards in favor of direct online retail auto sales and bird-dog fees that seems to attract high Wall Street valuations, like the others with this business model?

TROY, Mich.--J.D. Power, a global leader in data analytics and consumer intelligence, today announced it has entered into an agreement to purchase ALG, Inc., from TrueCar, Inc., for $135 million. ALG is an industry authority on automotive residual value projections in both the United States and Canada. The acquisition is expected to augment offerings from the data & analytics division of J.D. Power.

“We believe ALG will bring complementary strengths and value to J.D. Power and its clients,” said Dave Habiger, president and CEO of J.D. Power. “For more than 50 years, ALG has been a trusted data provider to the automotive industry delivering accurate and reliable residual value forecasts. Adding that component to our extensive data assets, valuation expertise and analytic tools will enable us to provide even more value to our clients. We are excited to welcome the ALG team to J.D. Power.”

Residual values are the foundation of auto leasing and are used across multiple segments of the automotive industry. Almost one-third of new vehicles sold each year are leased, typically for a three-year term. At any point in time, the value of vehicles in outstanding lease portfolios is estimated at $500 billion. Accurately predicting the value of vehicles at the end of the lease term is an essential activity for vehicle manufacturers and finance companies.

Countless variables affect the actual residual value of a vehicle over a multi-year lease term. Examples include mileage, quality/reliability, options and feature sets, weather and the macroeconomic environment. Since these factors need to be taken into account in order to accurately forecast residual values, the more granularity and greater the understanding of the impact of each variable, the better equipped manufacturers and lenders are able to maximize profitability. The combination of J.D. Power’s capabilities and data with ALG’s deep experience in residual values will allow for even more accurate end-of-lease forecasting capabilities.

”Today’s announcement is a tremendous outcome both in terms of the value delivered to our shareholders and the potential ALG will have with its new owner,” said Mike Darrow, president and chief executive officer of TrueCar. “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, strong automotive industry expertise and trusted reputation, represents the best path forward for ALG’s clients. J.D. Power’s unwavering dedication to its clients and the remarkable level of trust it has built among consumers and the auto industry bodes well for the future of ALG.”

The transaction is expected to close by the end of 2020 and is subject to customary closing conditions as well as regulatory review and approval. Upon approval and close, all 40 ALG employees will join J.D. Power.

J.D. Power is a global leader in consumer insights, advisory services and data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, J.D. Power has been delivering incisive industry intelligence on customer interactions with brands and products for more than 50 years. The world's leading businesses across major industries rely on J.D. Power to guide their customer-facing strategies.

J.D. Power is headquartered in Troy, Mich., and has offices in North America, Europe and Asia Pacific. To learn more about the company’s business offerings, visit JD.Power.com/business. The J.D. Power auto shopping tool can be found at JDPower.com.

August 06, 2020 16:03 ET | Source: TrueCar, Inc.

Board of Directors authorizes $75 million share repurchase program
Proceeds from sale of ALG used to support this repurchase program, fortify balance sheet and maintain strategic flexibility

SANTA MONICA, Calif., Aug. 06, 2020 (GLOBE NEWSWIRE) -- TrueCar, Inc. (NASDAQ: TRUE), the most efficient and transparent online destination to find a car, announced today that it has entered into an agreement with J.D. Power to sell its ALG, Inc. subsidiary for $135 million. The total consideration includes an upfront cash payment of $112.5 million at closing and total deferred payments of up to $22.5 million based on certain financial results.

TrueCar also announced that its Board of Directors has authorized a share repurchase program of up to $75 million, with the intent to begin repurchasing shares in the near-term. The company intends to use available cash as well as the proceeds from the ALG divestiture to support this repurchase program, fortify its balance sheet and maintain strategic flexibility.

“Today’s announcement is a tremendous outcome both in terms of the value delivered to our shareholders and the potential ALG has with its new owner,” said Mike Darrow, President and Chief Executive Officer of TrueCar. He continued, “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.”

TrueCar’s Chief Financial Officer, Noel Watson, added, “The successful completion of this transaction represents yet another milestone in our ongoing transformation. We continue to believe that an unwavering focus on our core business will drive a balance of sustainable growth and profitability that maximizes long-term shareholder value.”

Transaction Highlights

Total consideration of $135 million comprised of: (i) an upfront cash payment of $112.5 million at closing, (ii) up to $7.5 million payable in early 2021 based on ALG’s 2020 revenue and (iii) up to $15 million payable in 2023 based on 2022 revenue
Sale multiple of 7x LTM ALG revenue unlocks immediate value for TrueCar shareholders
Reinforces management’s focus on core business and commitment to creating shareholder value and is consistent with other steps taken towards that end

The transaction was unanimously approved by TrueCar’s Board of Directors and is expected to close by the end of 2020. The closing is subject to customary closing conditions as well as regulatory review and approval.

Goldman Sachs & Co. LLC. is serving as exclusive financial advisor to TrueCar in connection with the transaction and Cooley LLP is serving as legal counsel.

About TrueCar

TrueCar is a leading automotive digital marketplace that enables car buyers to connect to our nationwide network of Certified Dealers. We are building the industry's most personalized and efficient car buying experience as we seek to bring more of the purchasing process online. Consumers who visit our marketplace will find a suite of vehicle discovery tools, price ratings and market context on new and used cars – all with a clear view of what's a great deal. When they are ready, TrueCar will enable them to connect with a local Certified Dealer who shares in our belief that truth, transparency and fairness are the foundation of a great car buying experience. As part of our marketplace, TrueCar powers car-buying programs for over 250 leading brands, including AARP, Sam’s Club, and American Express. Nearly half of all new-car buyers engage with TrueCar powered sites, where they buy smarter and drive happier. TrueCar is headquartered in Santa Monica, California, with offices in Austin, Texas and Boston, Massachusetts.