Shares of automotive retail technology company CDK Global, Inc. (NASDAQ: CDK) surged 11.3% on Thursday to close at $54.50 after the company announced that it signed an agreement to be acquired by Brookfield Business Partners (NYSE: BBU) for $8.3 billion.
As per the terms of the agreement, Brookfield will pay $54.87 per share in cash to the shareholders of CDK. The price represents a premium of 30% over the price of CDK stock on February 18.
Brian Krzanich, the President and CEO of CDK, said, “This transaction is an exciting next step for CDK that provides our shareholders with both certainties of value and a meaningful premium. It also allows CDK to continue executing our long-term strategy to connect our industry at every level and create an open and collaborative future.”
Following the completion of the transaction, which is expected in the third quarter of this year, CDK stock will stop trading on NASDAQ.
Based out of Illinois, CDK offers retail technology and software as a service (SaaS) solutions to automotive, heavy truck, recreation, and heavy equipment industries. It has more than 15,000 retail locations across North America.
Wall Street Weighs In
After the deal was announced, Barrington analyst Gary Prestopino downgraded the rating on the stock to Sell from Buy with a price target of $57.5 (5.5% upside potential).
The analyst expects CDK to get a competing bid and believes “the price per share is below that of similar take-private transactions in the market.”
Based on a single Sell, CDK has a Moderate Sell consensus rating. CDK’s average price target of $57.50 implies 5.5% upside potential from current levels. Shares have gained 27.8% year-to-date.
Once the acquisition is complete, CDK will be able to focus on enhancing the dealer and consumer experience during the entire life cycle of a vehicle. It will also be able to concentrate on boosting its digital presence.
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