Rival Web Auto Brokers Merge in Stock Swap

Online car broker Autobytel.com Inc. earlier this month drove home a bargain when it acquired rival Autoweb.com Inc. in a $15.6 million stock-swap deal aimed at pumping new life into the dot-coms, both of which have recently taken big hits on Wall Street.

The merged company, called Autobytel Inc., hopes to generate more than $100 million in annual revenue and reach profitability by the third quarter, excluding merger costs, said Autobytel CEO Mark Lorimer.

Both Irvine, Calif.-based Autobytel.com and Santa Clara, Calif.-based Autoweb.com will continue to operate as separate Web sites. But the acquisition will consolidate Autobytel's channel of 4,800 dealers in the U.S. and Europe with Autoweb's U.S.-based network of 5,000 dealers. Their combined networks will include 7,000 separate dealerships, officials said, as some dealers currently use both services.

"This is an eyeball gain, instead of an attempt to increase revenue," said Thilo Koslowski, an automotive market analyst at Gartner Inc. in Stamford, Conn. "They will expand their customer base on the consumer side but not from the dealer perspective."

Both firms get the majority of their revenue from selling leads to automotive dealers. Koslowski said that to gain greater consumer exposure, the merged company will need to strike more partnership deals with content providers, such as the one that links its site with America Online Inc.

The merger agreement calls for Autobytel to swap about one-third of a share of its stock for each of Autoweb's 29.5 million shares. The cost is equivalent to 53 cents per share, 83% more than Autoweb's closing share price of 29 cents the day before the April 11 merger.

Just over a year ago, Autoweb's stock closed at $6.44 per share, giving it a market cap of about $190 million. But the stock values of both firms have plummeted in the bear market, with Autobytel's share price tumbling from a year-high of $8.53 in June to a year-low of $1.33 on April 9. "The pricing dynamics were right," Lorimer said.

Autobytel posted a loss of $29 million, or $1.45 per share, for the fiscal year ended Dec. 31, compared with a loss of $23.3 million, or $1.48 per share, in 1999. Revenue rose 65% from 1999, to $66.5 million last year.

For its fiscal year ended Dec. 31, Autoweb reported losses of $38 million, or $1.35 per share, compared with a loss of $18 million, or 85 cents per share, in 1999. Revenue grew 59% to $52.3 million, from $32.8 million in the previous year.

Jeffrey Schwartz, Autoweb's CEO, will become vice chairman of the merged company. Two other Autoweb executives will also get seats on Autobytel's board of directors.

Copyright © 2001 IDG Communications, Inc.

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