CDK Global’s $8.3 Billion Deal to Go Private Could Accelerate Growth

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Brookfield Business Partners is part of the private equity group of Brookfield Asset Management, a global alternative asset manager.

Brookfield will purchase all outstanding shares of CDK, and CDK shareholders will receive $54.87 per share in cash when the transaction closes, which is expected to be in the third quarter, CDK said. The price is said to reflect a 30 percent premium to CDK’s closing price on Feb. 18, which the company said was the last full day of trading before market speculation began about a potential sale.

The company has not disclosed any details about the bidding process, other than that CDK’s board of directors considered “multi-month strategic and financial alternatives” before selecting Brookfield.

In a press release, Brookfield said CDK is attractive for its market leadership; the recurring subscription-based revenue streams; the potential for upside amid consolidation in auto retail; and what it said are “meaningful opportunities” to improve CDK’s value.

“We are excited to increase our technology footprint with the acquisition of CDK Global, and look forward to leveraging our operational capabilities to build on the company’s track record of providing the best customer service possible and innovation in its class,” Doug Bayerd, Brookfield Business Director of Partners, said in a statement.

A Brookfield representative did not respond to a request for additional comment. Tautges said decisions about CDK’s leadership team had not been made prior to the closing of the transaction.

Analysts following CDK said: Automotive News that the company has invested in expanding its product range, but that strategy is not aligned with investor expectations.

“The company was not rewarded for what they did,” said Gary Prestopino, director of Barrington Research, which tracks CDK.

Shareholders of a publicly traded company want to see consistent earnings growth, Prestopino said, which doesn’t always happen when the company invests for the future.

“This, I think, is the best possible outcome for CDK’s executive team to get it out of the public eye, to be able to build this thing for years to come without worrying about meeting quarterly investment expectations.” ,” he said. “And in a few years they might have it where they need it, and they might make it public again, or it might be a private equity transaction.”

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