TrueCar has sold its automotive insights company, ALG, to J.D. Power for $135 million. The move will give the vehicle listings site much-needed cash, as well as allow it to start a share buyback program.
ALG is a data analysis firm that offers insights on new vehicle launches and future resale value. The company claims to have advised 40% of all new vehicle launches in North America. ALG was bought by TrueCar in 2011 for an estimated $83 million. J.D. Power is data analytics and consumer intelligence company owned by Thoma Bravo, a private equity firm that also owns AutoTrader.ca, among other assets.
The deal is split into two parts: an upfront cash payment of $112.5 million, and $22.5 million in deferred payments, which are based on reaching unspecified financial targets. That upfront cash payment will be a boon to TrueCar, which saw revenue decline every quarter in 2019. The company also lost nearly 10% of its client base in the first quarter of 2020. Adding insult to injury, TrueCar lost its valuable relationship with USAA in May, leading the marketplace to cut 30% of its workforce.
TrueCar will use $75 million of the upfront payment to buy back its own shares, which have been on the decline since peaking at $21 in July 2017. As of closing Thursday, shares in TrueCar (NASDAQ: TRUE) were trading at around $4, up from a low of $2 in April.
“Today’s announcement is a tremendous outcome both in terms of the value delivered to our shareholders and the potential ALG has with its new owner,” said Mike Darrow, president and CEO of TrueCar. “After careful consideration of a variety of options and potential partners, it became clear that a sale of ALG to J.D. Power, with its breadth of complementary services, represented the best possible path forward for all parties.”