* Investment funds selling shares; hold total worth bout
* Share sale follows failed effort to sell the company
* KAR shares drop 4.5 percent
NEW YORK, Nov 30 KAR Auction Services Inc
said on Friday its private equity owners would sell up
to $200 million of their shares, a move that comes just weeks
after people familiar with the matter said the vehicle auction
company had ended efforts to sell itself.
KAR said the shares would be sold by investment funds Kelso
Investment Associates VII LP, GS Capital Partners VI LP.,
ValueAct Capital Master Fund LP and Parthenon Investors II LP,
which together own 78.2 percent of KAR's shares.
The holdings represent a market value of about $1.9 billion
as of the end of trading on Friday.
KAR said the sale of shares would be through an
underwritten offering of up to $200 million. All proceeds will
go to the investment firms.
Shares in KAR, the second largest provider of whole car
auctions in the United States, ended trading down 4.5 percent on
the news at $17.77.
KAR had ended efforts to sell itself after talks with
private equity firm Clayton Dubilier & Rice LLC broke down over
price and other deal terms, Reuters reported on Nov. 13.
KAR also said on Friday it would pay its first-ever dividend
after clinching amendments to a credit agreement to increase the
amount of restricted payments, such as dividends and share
buybacks, that are permitted. The initial quarterly dividend of
19 cents per share will be paid on Dec. 28, KAR said.
Standard & Poor's Ratings Services said on Tuesday in a note
that KAR's financial policy appears to have become more
aggressive, as the increased size of the restricted payment
basket signals it may make restricted payments out of free
operating cash flow to shareholders rather than using cash flow
to reduce debt, as was its policy as of early 2011.
Private equity has been seen as the most likely buyer for
the Carmel, Indiana-based company, with any buyer in the sector
likely to be hampered by tough competition in the used-car
wholesale and salvage auction markets.
KAR's ADESA and rival Manheim, a unit of Atlanta-based Cox
Enterprises, together have an estimated 70 percent share of the
U.S. used-car wholesale auction market, with ADESA accounting
for 25 percent, according to KAR's estimates.
Credit Suisse Securities (USA) LLC, Goldman Sachs
& Co and J.P. Morgan Securities LLC are acting as
joint book-running managers for the offering. KAR said it
intended to grant the underwriters an option to purchase an
additional 15 percent of the number of shares in the offering.