Brookfield buys automotive software maker CDK Global for $6.41 billion

April 7 (Reuters) – Brookfield Business Partners is buying CDK Global Inc (CDK.O) for $6.41 billion in cash, taking over the last major publicly traded provider of software for auto dealers and manufacturers.

The purchase, announced Thursday, gives the private equity firm a strong foothold in an industry that’s projected to be worth $29.3 billion by 2026, thanks to the increasing software needs of companies ranging from electric vehicle startups to established automakers.

CDK Global has come under pressure to sell itself in recent years and has been a target of activists. It has spun off low-margin businesses and instead tried to grow its digital business by buying online platforms like Salty Dot, Roadster and Square Root.

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“There was a fundamental mismatch between the goals of the investor base and the company itself. As a private company, they can continue this transition and expand their digital footprint,” said Oppenheimer analyst Ian Zaffino.

The deal, with Brookfield Business Partners, a unit of Brookfield Asset Management (BAMa.TO), offers CDK investors $54.87 for each share held, a 12% premium to the company’s closing price on Wednesday.

The enterprise value of the transaction is $8.3 billion and is expected to close in the third quarter of 2022.

Shares of CDK Global, which fell 19% last year, rose more than 11% in early trade on Thursday.

Brookfield said the deal is a bet on CDK Global’s subscription-based software model and expects the company to benefit from increased consolidation across the merchant industry.

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Reporting by Nivedita Balu and Eva Mathews in Bengaluru; Editing by Aditya Soni

Our standards: The Thomson Reuters Trust Principles.

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