The business unit that Camel-based KAR Auction Services Inc. plans to spin off into a separate publicly traded company will remain headquartered in Illinois, the company said Wednesday.
KAR announced plans late Tuesday to spin off its Insurance Auto Auctions salvage auction business division within the next year.
On Wednesday, KAR executives conducted a conference call with investors to provide further details on the decision. CEO Jim Hallett didn’t address where IAA would be located during the call. But a KAR spokesman told IBJ on Wednesday that the corporate office would remain in Illinois.
IAA is based in Westchester, Illinois, a Chicago suburb, where it moved in the 1990s. It was founded in Van Nuys, California, in 1982 as Los Angeles Auto Salvage.
Under the proposal, stockholders in KAR would retain shares in the remaining KAR Auction Services business and receive new shares of IAA. Those shares are expected to trade on the New York Stock Exchange.
IAA accounted for $1.2 billion, or 34 percent, of KAR’s 2017 total revenue of $3.5 billion.
“We feel, No. 1, that both businesses have grown to a size and strength that they can stand alone,” Hallett told investors on the call.
The separation also will simplify what investors have described to Hallett as “a very complex business model,” he said.
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.
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 were up about 4 percent late Wednesday morning, to $54.08 each.