Used car retailer Vroom, Inc. (VRM) recently announced that it has entered into a definitive agreement to acquire United Auto Credit Corporation (UACC), an automotive finance company, for $300 million. The transaction is likely to close either in the fourth quarter of 2021 or early in the first quarter of 2022.
Following the news, shares of the company gained 2.5% on Tuesday. The stock rose slightly in extended trade to close at $21.19.
With this acquisition, Vroom will be able to strengthen its captive financing capabilities and improve its revenues and operations. Notably, Vroom expects the buyout to be immediately accretive to its earnings. Post the buyout, UACC will become an indirect wholly-owned subsidiary of Vroom and will continue to operate under the UACC name.
The CEO of Vroom, Paul Hennessy, said, “We were impressed with the UACC team’s depth of expertise, as well as their commitment to their customers, and are thrilled to have them as part of the team as we advance our lending offering and continue our asset-light approach to scaling our business. The transaction represents a meaningful strategic opportunity, with significant potential for enhancing aggregate gross profit and improving customer satisfaction.” (See Vroom stock chart on TipRanks)
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On October 12, Wells Fargo analyst Zachary Fadem reiterated a Buy rating on the stock with a price target of $45, which implies upside potential of 113.6% from current levels.
Consensus among analysts is a Strong Buy based on 5 Buys and 1 Hold. The average Vroom price target of $46 implies upside potential of 118.3% from current levels. Shares have declined 55.5% over the past year.
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