IPO will be biggest in Chicago in 2017 – Marketing/media News

on Jun1

1 June 2017 | 10:30 am will list its stock on the New York Stock Exchange today in what is expected to be the biggest initial public offering of a local company so far this year.

The company, which provides car buyers with research and makes money from selling ads to car dealers and automakers, has grown into one of Chicago’s largest digital media businesses, with revenue of $633 million last year and a headcount of nearly 1,300, according to a regulatory filing for the IPO.

“We expect the trend of more car shoppers going online in search of cars to continue and as a result, advertising revenue from increased traffic to web sites such as should jump,” Spin-Off Research said in a report. Still, it caveated its outlook by noting a hefty $650 million Cars must pay its former parent, McLean, Va.-based Tegna, as part its spinoff.

The May 19 report from Spin-Off Research estimates a market capitalization of $2.2 billion, based on a $30 per share price. That would make the IPO the biggest for a metro Chicago company since trailer and motorhome company Camping World went public last October.

Cars was launched in 1998 by a group of newspapers, including Chicago Tribune’s parent, that were eager to hang on to lucrative classified auto advertising. Back then it was a division of the now defunct Chicago-based Classified Ventures. Now, it’s an advertising juggernaut. Revenue climbed 6 percent last year, lifting net income 11 percent to $176.4 million.

Cars, with a clutch of sites including and plus mobile applications, has grown so much that it’s moving into a larger building this month, shifting west from the Loop to the other side of the Chicago river near Union Station.

Still, the regulatory filing sought to assure new investors that it will “deliver robust results while maintaining a low headcount relative to the size of its operations.” To that end, the company cut three dozen employees last month, including some who had been with Cars from its earliest days, according to sources familiar with the job reduction.

In a statement, CEO Alex Vetter said this about the reorganization: “Throughout the last several months, we assessed the skills needed to run as a standalone public company, and these changes will ensure our sustainable future as a leading digital automotive marketplace.”

In the twisting corporate history of Cars, Gannett bought out its other newspaper owners in a 2014 deal that valued the digital company at $2.5 billion. Then Gannett split into two companies in 2015, cleaving its newspaper business from a group of digital businesses, including Cars, that became Tegna. Tegna spun off the Cars unit last month.

Cars faces an increasingly competitive industry despite the expected growth of digital advertising, with a fleet of rivals, including, owned by Cox Enterprises, which has been expanded through acquisitions. Cars made its own purchase last year of a site for car dealer reviews called DealerRater.

“This industry will consolidate more over the next few years and I think being a standalone independently held company positions us to be one of the consolidators in the category,” Vetter said in an interview, adding that Cars acquisitions could be in any part of the industry.

Cars told investors and prospective shareholders last month that revenue growth is likely to be flat this year, with profit weighed down by costs associated with taking the company public and increased marketing expense. Next year, the company said, it expects revenue growth to rebound to 5 to 10 percent.

Vetter started as a Cars sales representative in 1998, moving over from Tribune Interactive. The company has signed up Scott Forbes, formerly chairman of Orbitz Worldwide, as its new board chairman.

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