Our view: BBU has been very active deploying capital in 2022 (CDK Global, Nielsen, La Trobe Financial, Magnati, Jindal Polyfilms packaging business, Cupa Group). BBU has experience investing in Auto sector businesses (e.g., Cardone). The acquisition should help improve NAV growth and ultimately BBU’s share/unit price. As at Q4/21, BBU had $2.2B of liquidity ($0.7B cash, $1.5B credit facilities) + $1B preferred shares that it could issue to BAM if needed. BBU could syndicate its commitments, but committed ~US $500MM for CDK, ~US$600MM for Nielsen, ~US$250MM for La Trobe and ~US$780MM for Scientific Games Lottery business.
Summary: BBU, together with its institutional partners, agreed to acquire CDK Global (NASDAQ: CDK), a software provider for the automotive retail sector, for ~US$6.4B in cash (or US$54.87/share, a 30% premium to CDK’s unaffected share price on February 18, 2022, the day prior to market speculation regarding a potential transaction) through a tender offer. The investment will be funded with US$3.5B of equity, of which US$0.5B is attributable to BBU and is expected to be funded by issuing US$0.5B of 6% perpetual preferred equity to BAM, which can be redeemed at par at the option of BAM should BBU complete asset sales or an equity issuance. The transaction is expected to close in Q3/22 subject to the tender of shares representing at least a majority of the total number of CDK's outstanding shares and other regulatory approvals.
CDK Global is a software provider for more than 15,000 auto, heavy truck, agriculture, construction, power sports, marine and RV dealerships across North America. The company provides software solutions throughout a dealership's workflow, including vehicle sales, financing, data management and CRM.