Why US investors paid €5.7m for Scout24
Holding company for investment funds Pulver BidCo has announced it will take over all shares of Scout24, a leading operator of digital marketplaces for automotive and other businesses in Germany and elsewhere in Europe.
Pulver BidCo, jointly controlled by US investment companies Hellman & Friedman LLC and The Blackstone Group LP, has agreed to pay €46 per Scout24 share in cash. An earlier bid of €43.5 per share was rejected. The deal implies an equity value of Scout24 of around €4.9 billion, and an enterprise value of around €5.7 billion.
Scout24 is the parent of the successful German online marketplaces ImmobilienScout24 and Finanzcheck.de. It is best known for AutoScout24, one of two leading digital marketplaces for automotive business in Germany. Its main competitor is mobile.de, which has a similar size and is owned by eBay.
AutoScout24 has a presence in seven other European countries: France, Spain, Italy, the Benelux countries and Austria. The marketplace is mainly used by branded dealers and used-car specialists, not so much by private customers (less than 20%). It bundles additional services such as credit checks and car financing in Scout24 Consumer Services, a separate business unit. In all, the Scout24 employs about 1,200.
From 2004, Scout24 was owned by Deutsche Telekom, which in 2014 sold 70% of the company’s shares to Hellman & Friedman, which in 2015 offered its stake on the Frankfurt stock exchange and withdrew entirely from the company in 2016. A few days ago, Scout24’s annual report showed a result of €532 million for 2018, up 12% over the previous year.
The takeover, which is subject to approval by the shareholders and the relevant authorities in Germany, is labelled as a ‘strategic partnership’ with Hellman & Friedman and Blackstone. The investors share the long-term ambitions and strategy of Scout24’s Management and Supervisory Boards, which is to turn Scout24 into a leading European digital player and are keen to add value to the company’s existing proposition. Following the successful conclusion of the deal, it is likely Scout24 will be delisted from the Frankfurt stock exchange.
“Personally, I found the deal a bit overpriced,” says Wolfgang Reinhold, president of the European Car Remarketing Association (CARA). “€5.7 billion for a website and 2 million non-owned units is about €2,500 per unit. In my estimation, they make about €300 per transaction, in buyer and seller fees.”
So why were the investors willing to shelve out such a high price for Scout24? “Because they can see that the used-car market is profitable: companies like Scout24 and mobile.de are high in investments but low on assets. It’s still a booming business. Just look at new market entry Heycar, or like PSA’s recent investment in FengChe in China.”
Lots of potential
Marcel De Rycker, Managing Director of International Warranty Solutions, sees the money sense behind the deal: “AutoScout24 is a well-established brand in the biggest automotive market in Europe, and still has lots of potential for development in other European market. Their B2B focus will support sustainable business development. And the company’s real-estate and financing affiliates remain attractive as well.”
“Plus, they’re a digital operation. When I visited them in Berlin some time ago, they had the look and feel of a web agency. They’re organised like big digital-first players like Google and eBay.”
Squeeze the lemon
As for Scout24’s future prospects after its acquisition, Mr De Rycker sees it as a lever for growth: “The takeover gives them the potential to develop a large platform throughout Europe, offering their B2B customers additional sales potential.”
Mr Reinhold has fewer illusions as to the future path for Scout24: “Since it is been taken over by what looks like a private equity company, it’s most likely that they’ll try to squeeze the lemon, increase the profit margin and then sell the company – the usual story.”