CDK Global’s $8.3 billion deal to go private could accelerate growth

Brookfield Business Partners is a unit of global alternative asset management firm Brookfield Asset Management’s private equity group.

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

The company did not disclose details about its process of seeking bids, other than that CDK’s board considered “strategic and financial alternatives over several months” before selecting Brookfield.

In a news release, Brookfield said CDK is attractive for its market leadership; its 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 grow our technology footprint with the acquisition of CDK Global, and we look forward to leveraging our operating capabilities to build on the company’s track record of providing best-in-class customer service and innovation,” Doug Bayerd, Brookfield Business Partners’ managing director, 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 ahead of the transaction closing.

Analysts who follow CDK told Automotive News that the company has been investing in growing its product lineup, but that strategy hasn’t aligned with investor expectations.

“The company was not getting rewarded for what they were doing,” said Gary Prestopino, managing director at Barrington Research, who follows CDK.

Shareholders of a public company want to see consistent earnings growth, Prestopino said, which does not always occur when the company is investing for the future.

“This is the best possible outcome, I think, for the executive team of CDK in terms of taking it out of the public eye, being able to build this thing over the next couple years without having to worry about meeting quarterly investment expectations,” he said. “And in a couple of years, they may have it where they need it to be, and they may take it public again, or it may be a private equity trade.”