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KAR to spin off Insurance Auto Auctions unit, creating separate public firm

February 27, 2018

Carmel-based KAR Auction Services Inc. on Tuesday afternoon said it plans to spin off its Insurance Auto Auctions salvage auction business unit within the next year, creating a separate publicly traded company.

KAR officials said the decision has been approved by the company’s board of directors. The separation is designed to “increase shareholder value and focus each company’s strategic priorities on its respective marketplace and unique customers,” the company said in a written statement.

Under the proposal, stockholders in KAR would retain shares in the remaining KAR Auction Services business and receive new shares of Insurance Auto Auctions, or IAA. Those shares are expected to trade on the New York Stock Exchange.

Details of the stock distribution are expected to be filed later this year, KAR said.

IAA accounted for 34 percent of KAR's revenue of $3.5 billion in 2017.

After the separation, KAR would focus primarily on its whole car auction marketplaces and technology side of the business. IAA would focus on the salvage vehicle marketplace, serving insurers and buyers including dealers, recyclers and metal-scrapping companies.

Jim Hallett will remain CEO and board chairman for KAR. John Kett, IAA’s president and CEO, will continue to lead IAA.

“IAA has been a meaningful part of the KAR platform for over 10 years, despite limited operational overlap between IAA and KAR’s core whole car operations,” Hallett said in the statement. “The proposed separation will give KAR and IAA the flexibility to advance unique strategic priorities and make independent decisions on investments, acquisitions and capital expenditures. In turn, this will help both companies focus investments and innovation on serving their customers and strengthen their respective competitive positioning in the global marketplace.”

KAR did not say where IAA would be headquartered after the separation. The business unit is now based in Westchester, Illinois, where it moved in the 1990s. It was founded in Van Nuys, California, in 1982 as Los Angeles Auto Salvage.

IAA is expected to retain its North American salvage vehicle operations and the HBC Vehicle Services business in the United Kingdom. All other KAR businesses will remain part of KAR Auction Services.

KAR sold 3.2 million vehicles in 2017 and operates in 75 auction locations and more than 100 finance locations. The company employs 17,400 employees in the United States, Mexico, Canada and the United Kingdom, including 1,600 in Indiana. About 900 of those employees are based at the Carmel headquarters.

IAA operates in 186 locations and sold 2.4 million vehicles last year. It reported $1.2 billion in revenue last year. It has more than 2,700 employees.

KAR shares rose 2 cents Tuesday, to close at $51.99 each, prior to the announcement.

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