KAR Plans to Spin Off Salvage Auctions

By Ted Craig February 28, 2018

KAR Auction Services Inc. plans to spin off its salvage auction arm, Insurance Auto Auctions (IAA).

The separation aims to increase shareholder value and focus each company’s strategic priorities. The tax-free spin-off is expected to close within the next twelve months and will create two independent, publicly traded companies. 

“IAA has been a meaningful part of the KAR platform for over ten years, despite limited operational overlap between IAA and KAR’s core whole car operations,” said Jim Hallett, Chairman and CEO of KAR Auction Services, Inc. “The proposed separation will give KAR and IAA the flexibility to advance unique strategic priorities and make independent decisions on investments, acquisitions and capital expenditures. In turn, this will help both companies focus investments and innovation on serving their customers and strengthen their respective competitive positioning in the global marketplace.”

The decision to split up the companies was approved by the KAR board of directors after considering several options. KAR executives said they believe the proposed transaction will unlock shareholder value not currently reflected in the combined company by simplifying the business model and financial reporting of the independent companies.

It will allow investors to value the companies on their merits.

“Our primary responsibilities are to deliver on our customer commitments and maximize value for our stockholders,” Hallett said. “The two companies will offer distinct and compelling investment opportunities based on track records of successful performance and highly streamlined operating models.”

After completion, KAR will focus primarily on its whole car auctions and technology. IAA will focus on serving insurance companies and a network of buyers including dealers, vehicle and parts recyclers and metal scrapping companies.

Hallett will remain CEO and chairman of the board of directors for KAR. John Kett, who currently serves as IAA’s president and CEO, will continue to lead IAA after the separation.

“The support of KAR has allowed IAA to significantly grow our business and deliver an unmatched portfolio of products and services to our insurance customers,” Kett said. “With this strong foundation and our robust pipeline of innovation, IAA is well positioned to serve our customers and expand our market presence after separation.”

Following the separation, IAA will retain its North American salvage vehicle operations and the HBC Vehicle Services business in the UK.

All other current businesses will remain part of KAR.


Last modified on Monday, 19 March 2018 20:37