Cox Enterprises to buy back AutoTrader stake

(Reuters) - Privately held Cox Enterprises Inc, owner of the third largest cable operator in the United States, said on Friday it would acquire the 25 percent stake it does not already own in AutoTrader Group Inc, the online car marketplace operator.

Cox had sold the stake to private equity firm Providence Equity Partners LLC in 2010. By buying it back, it will increase its stake in AutoTrader to 98 percent, with the remainder held by past and present AutoTrader employees.

Terms of the deal were not disclosed. A person briefed on the matter, who was not allowed to disclose financial details publicly, said Cox would buy the stake from Providence for $1.8 billion.

Including a $100 million dividend Providence has received from AutoTrader, the terms mean that Providence stands to make three times its money on the transaction, the person added.

Founded in 1997, AutoTrader, which owns the and Kelley Blue Book brands, has grown into the largest digital automotive marketplace in the United States. It has benefited in recent years from car sales that have outpaced the economic recovery. For all of 2013, U.S. auto sales are expected to have finished near 15.6 million, up about 8 percent from 2012, making it the strongest year for vehicle sales since 2007.

The deal comes one year after AutoTrader withdrew its registration for an initial public offering, citing market conditions. Last summer, Cox bought a roughly 5 percent stake in AutoTrader from venture capital firm Kleiner Perkins Caufield & Byers.

AutoTrader has been highly acquisitive since 2010, buying six other companies, including Kelley Blue Book, as well as a 21.8 percent stake in Bitauto, an Internet content and marketing services provider for the Chinese car industry.

Cox also owns car auction company Manheim, whose brands include Simulcast and

Sandy Schwartz, who is president of both AutoTrader and Manheim, told Reuters in September that Cox had no plans to take either of the two units public, and while it was considering possible add-ons, there was no intention to combine the two.

AutoTrader’s annual sales were at around $1.2 billion and growing at a double-digit rate, Schwartz said at the time. The Manheim business, with about $3 billion in annual sales, was growing more modestly, at less than 5 percent, he added.

Providence manages $37 billion in investor commitments, focusing in companies in the media, communications, education, and information sectors.

The Providence, Rhode Island-based firm raised a $5 billion private equity fund last summer, less than the $6 billion it was targeting and less than half its $12.1 billion previous fund, which it raised in 2007.

That 2007 fund, Providence Equity Partners VI, was marked at 1.1 times its investors’ money as of the end of June, according to Washington State Investment Board, one of its investors. That compares with an average 1.33 times return as of the end of June for the 93 U.S. private equity funds of the same vintage monitored by investment advisory firm Cambridge Associates LLC.

Reporting by Greg Roumeliotis in New York; Editing by Leslie Adler