Cazoo to Go Public via SPAC Merger with AJAX I

Cazoo, a prominent U.K.-based online used-car marketplace, has announced its intention to become a publicly listed company through a merger with AJAX I, a special purpose acquisition vehicle. AJAX I was established by renowned hedge fund manager Dan Och, alongside Glenn Fuhrman and other partners.

Deal Details and Financials

The transaction values Cazoo at $7 billion and incorporates $1.6 billion in additional funding. This includes $805 million in cash held by AJAX I and an $800 million PIPE – a private investment in public equity – spearheaded by AJAX sponsors and existing Cazoo investor, D1 Capital Partners.

A diverse group of investors are participating in the PIPE, including Altimeter, BlackRock, Counterpoint Global (Morgan Stanley), Fidelity Management, Marcho Partners, Mubadala Capital, Pelham Capital, Senator Investment Group, and Spruce House Partnership. The boards of both Cazoo and AJAX I have already given their approval to the deal.

Company Vision and Growth Strategy

Alex Chesterman OBE, founder and CEO of Cazoo, stated that this listing represents a significant step in the company’s mission to revolutionize car buying throughout Europe.

“We’ve built a comprehensive and fully integrated platform within a retail sector that currently experiences limited digital adoption,” Chesterman explained. “This deal will provide nearly $1 billion in additional capital to accelerate our expansion and enhance the car buying experience for customers across Europe.”

Leadership and Expansion Plans

Alex Chesterman, who previously founded LoveFilm (acquired by Amazon) and Zoopla, will continue to serve as CEO of Cazoo.

The company intends to utilize the newly acquired funds to further expand its operations across Europe, building on a year of substantial growth. Cazoo reported sales increases exceeding 300% and anticipates revenues nearing $1 billion for 2021.

First-quarter revenues reached an annual run rate of $600 million, driven primarily by used-car sales, alongside diversification into services like car subscriptions.

The Rise of SPACs as a Listing Option

Cazoo’s decision to pursue a SPAC merger highlights the increasing popularity of this route for privately held companies seeking public listing. It offers an alternative to traditional IPOs, which can be lengthy and complex.

This approach also allows companies based outside the U.S. to access the broader investor base of the U.S. public markets.

Investor Involvement and Strategic Control

The deal provides investors with the opportunity to contribute financing and exert strategic influence over the company’s direction. Dan Och will join Cazoo’s board of directors.

“We are thrilled to partner with Alex and the Cazoo team,” said Och. “Alex has consistently demonstrated entrepreneurial success, and we are proud to support the growth of this exceptional brand and platform.”

He added, “Cazoo’s commitment to innovation, data-driven insights, and customer satisfaction positions it to lead the way in this vast, untapped market.”

Long-Term Investment and Market Opportunity

D1 Capital Partners, a current investor in Cazoo, also expressed its continued support. Daniel Sundheim, founder of D1 Capital Partners, stated, “As a long-term investor in Cazoo, we are pleased to support its growth as a public company.”

“Cazoo’s decision to merge with AJAX and collaborate with Dan Och and other partners is a strategic move that will benefit the company’s future.”

Benefiting from Changing Consumer Behavior

Cazoo experienced significant growth during the COVID-19 pandemic, as consumers in the U.K. shifted away from in-person shopping and favored personal vehicle transportation.

The company successfully sold and delivered 20,000 cars through its digital platform during this period.

Expansion of Services and Funding History

Cazoo plans to expand its sales portal and other business lines, including its car subscription service, which currently has over 6,000 subscribers in the U.K., Germany, and France.

Founded in 2018, the company raised $427 million in funding last year, including $116 million in March and $311 million in October. The latter round valued Cazoo at just over $2.5 billion, representing a substantial increase with this latest SPAC transaction.

SPACs: A Growing Trend

SPACs have emerged as a popular alternative for startups with substantial existing funding. Companies like WeWork and eToro have also recently pursued SPAC mergers.

Some companies utilize SPACs after unsuccessful IPO attempts, while others see them as a faster and more efficient path to public listing and fundraising.

Future Outlook and Investor Considerations

While SPACs have generated significant valuations, the long-term performance of these companies in the public markets remains to be seen. Investors will be closely watching to determine whether they continue to support the growth of these highly scalable, yet potentially unprofitable, business models.

The future direction of these companies as public entities will also be a key factor to watch.