Online publisher TrueCar Inc. has signed a deal to acquire ALG Inc., a publisher of residual values and a subsidiary of DealerTrack Holdings Inc. TrueCar, which is based in Santa Monica, Calif., publishes new and used vehicle transaction data.
The particular financial details of the tax-free reorganization were not announced but DealerTrack said last Monday that it will get a 15% stake in TrueCar and warrants to raise its ownership interest up to 19.9%. Under the deal, Lake Success, N.Y.-based DealerTrack could utilize certain ALG intellectual property and data in its products and services.
In addition, DealerTrack will get the limited right to name a director to the board of TrueCar. From the sale, DealerTrack expects to recognize a pre-tax gain of a minimum of $40 million but doesn’t believe that the transaction will have a significant impact on its 2011 earnings guidance.
Meanwhile, ALG (which has about 45 employees) will proceed with operating as a separate company. A TrueCar spokesman said that ALG won’t have any management changes.
It’s expected that the deal, which is subject to regulatory approval, will be finalized in the fourth quarter. Founded in 2005, privately held TrueCar has reported profits since 2009. Financial services giant USAA Inc. is the largest investor in TrueCar.
It is increasing capital to rapidly expand operations to team up dealers with car shoppers and give real-time and accurate pricing information to consumers. Shoppers will know what to expect to pay for a specific car or light truck. They will also know the real cost of the vehicle to a dealer.