British used car company Cazoo is going public through a merger with billionaire investor Daniel Och’s special purpose acquisition company (SPAC).
Cazoo, founded three years ago, is an online used car marketplace based in the United Kingdom. The company sells and delivers its cars in Britain and continental Europe. Its competitors include Auto Trader and Carvana.
The company said it would combine with AJAX I, a U.S. blank-check firm founded by Och, in a deal valuing the business at $7 billion U.S. Founder Alex Chesterman will stay on as Cazoo’s chief executive officer following the SPAC merger, while Och is joining the company’s board.
SPACs are shell companies that are created with the sole purpose of raising funds to acquire an existing private company, so that the target firm can bypass the traditional initial public offering (IPO) process.
SPACs have become a hot investment vehicle on Wall Street, with SPACs in the U.S. having raised $87.9 billion so far in 2021, already exceeding the total issuance in all of last year. Once the deal closes, Cazoo will be traded publicly on the New York Stock Exchange.
Europe has largely missed out on the SPAC boom, so far. But there are growing signs of the trend emerging in the continent, with Amsterdam attracting a number of SPACs and London looking to relax stock listing rules to accommodate U.S.-structured blank-check companies.
Cazoo is expected to raise $1.6 billion U.S. from the deal with AJAX I, including $805 million U.S. in a cash trust from the SPAC and a further $800 million U.S. from private investors.
Cazoo had revenue of more than $600 million U.S. in the first quarter. It expects sales to near $1 billion U.S. in 2021, quadrupling year-on-year. The company believes Europe’s used car market is worth $700 billion U.S., with just 2% of sales taking place online.
Cazoo aims to fill an Amazon-shaped gap in the automotive industry. Online sales still account for a tiny slice of the overall market globally but are on the rise as e-commerce has gotten a lift from the global pandemic.
