KAR shares rise 40% after Carmel firm says it will sell ADESA

Shares in Carmel-based KAR Global were up nearly 40% in trading Friday, an endorsement of the company’s announcement late Thursday that it had agreed to sell ADESA—its unit focused on physical wholesale used vehicle auctions—to Tempe, Arizona-based Carvana Co.

The deal—which is expected to close in the second quarter—would essentially streamline KAR’s operations into a digital services and software company, a direction it had been heading over the past several years that was accelerated by the pandemic.

KAR CEO Peter Kelly described the transaction as “historic” during a call with analysts on Friday.

“I believe it’s a transaction that will be transformative for our company, for our customers, for employees and our stockholders,” he said. “In fact, I think I’m prepared to say that not only is this transaction transformative change for KAR, but it’s actually transformative change for industry as well.”

By 11 a.m., investors had driven KAR’s share price to $19, up from $13.69 at Thursday’s close. It remained near that price in early-afternoon trading.

Kelly told analysts that shedding the company’s physical auction unit will simplify the business and allow it to focus on digital services that are growing quickly and have a higher return on investment.

“The transaction advances our vision … to build the world’s greatest digital marketplaces for used vehicles,” he said. “”We’ve coalesced on that vision over the last 12 months, and that’s at the heart of our strategy and what we plan to do for our customers and the investments we plan to make in our business.”

The deal will shift about 4,500 of KAR’s roughly 10,000 employees to Carvana, including all of the workers at 56 ADESA service centers across the U.S., including one in Plainfield.

Overall, the company has about 1,000 employees in Indiana, but it declined to say how many of them would be affected by the change. However, Jill Trudeau, a KAR spokeswoman, said the “vast majority” of people moving to Carvana do not work in the corporate headquarters in Carmel, which opened in 2019.

She did not say how many people would remain at the headquarters building after the transaction. Currently, the KAR headquarters building is open and employees are using a hybrid work schedule, she said.

Trudeau said that after the ADESA deal closes, “we’ll evaluate the [headquarters] space and determine how to best use it.”

KAR also said in a statement that Carvana will not require any employees to relocate after the acquisition.

In a conference call Thursday just after the announcement, Carvana CEO Ernie Garcia said the company plans to continue operating ADESA as KAR has operated it.

“So for all the people inside ADESA, it will be business as usual,” Garcia said.