Carmel-based KAR Auction Services Inc. (NYSE: KAR) has announced plans to spin off its salvage auction business unit, Insurance Auto Auctions. The company says the spin-off will create two independent, publicly-traded companies and is expected to be complete within the next year.
KAR says the separation of the two entities was approved by the company’s board of directors and will "unlock shareholder value not currently reflected in the combined company." Once the spin-off is complete, KAR says its primary focus will be on its whole car auction marketplaces and technology solutions.
"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, chief executive officer of KAR Auction Services. "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."
After the separation is complete, Hallett will remain CEO of KAR and chairman of its board of directors. IAA will continue to be led by its current president and CEO John Kett. IAA will also retain its North American salvage vehicle operations and the HBC Vehicle Services business in the United Kingdom.
IAA’s focus following the spin-off will be on the salvage vehicle marketplace serving insurance carrier sellers and a network of buyers.
"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," said Kett. "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."
KAR says its shareholders will receive shares of IAA after the spin-off is complete. The deal remains subject to final approval by the KAR Board of Directors as well as market and regulatory approvals, and other closing conditions.