KAR Auction Services said late Tuesday afternoon that it is pursuing a spin-off of its Insurance Auto Auctions business unit.
KAR said in a news release the proposed tax-free spin-off is designed to “increase shareholder value and focus each company’s strategic priorities on its respective marketplace and unique customers” and is likely to close within the next 12 months.
The proposed separation would result in two independent, publicly traded companies: KAR Auction Services and Insurance Auto Auctions.
“IAA has been a meaningful part of the KAR platform for over 10 years, despite limited operational overlap between IAA and KAR’s core whole car operations,” Jim Hallett, chairman and chief executive officer, said in a news release.
“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,” Hallett said. “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.”
Under the spinoff, KAR stockholders would keep shares of the remaining KAR Auctions Services entity and receive new shares of Insurance Auto Auctions.
When the spin-off is complete, KAR will focus on the whole car auction marketplace and technology side of the business, while IAA will specialize on the salvage vehicle marketplace business.
Hallett will remain CEO and chairman at KAR, while IAA president and CEO John Kett will continue in that role with the spun-off IAA.
KAR is hosting an investor’s conference call about the proposed separation on Wednesday morning.
AuSM will have more on this story.