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Two of the country's leading car subscription companies will park in the same garage after Carly Holdings (ASX: CL8) reached a deal to merge with competitor Carbar, through a deal that will see most of the proceeds redirected to the ASX-listed company's lender iPartners.
Sydney-based Carly will be paid approximately $160,000 in cash and around $3.64 million in Carbar shares, although $2.77 million worth of those shares will go to financier iPartners which has agreed to terminate a convertible note facility with the group.
Through the acquisition, Melbourne-headquartered Carbar will also assume the debts of Carly subsidiaries OneX Operations and ElevenX Operations, worth $6.9 million and $1.2 million respectively. The proposed merger signed both parties is non-binding and still subject to a shareholder vote.
Carly reported its highest-ever quarterly revenue of more than $1.7 million in the December quarter, up 41 per cent year-on-year, and the group took steps to improve its bottom line with an 11 per cent reduction in staff costs following redundancies and an 18 per cent cut to advertising and marketing costs.
A review of fleet vehicles also saw the group dispose of $556,000 worth of vehicles in the period.
However, these actions were still not enough to prevent cash burn, particularly for operations which recorded a net cash outflow of $477,000. With just $500,000 in cash and $200,000 in unused loan facilities at the end of 2024, Carly estimated it had only one quarter of funding left at the year's close.
In today's announcement, Carly noted it had been reviewing growth and funding options for several months with its financiers, against a backdrop of broader consolidation in the automotive technology and mobility sectors where the number of car subscription services "grew exponentially after Carbar and Carly Car Subscription were the first to launch car subscription services in Australia
After exploring options such as refinancing, capital raising and "several M&A opportunities", the board felt the merger of its car subscription operations with Carbar would accelerate the size and scale, and "unlock significant synergies for the merged group".
The board believes the proposed transaction will provide significantly more value for shareholders than other alternatives.
"Since 2019 we have been passionate proponents of the car subscription model and the benefits and flexibility it offers consumers and businesses alike," says Carly CEO Chris Noone.
"As with many technology driven, high growth potential markets it is important to reach scale as quickly as possible to ensure success.
"The merger with Carbar will provide immediate economies of scale and access to capital to accelerate the growth for both brands."
Carly was first launched by sharing economy group Collaborate Corporation - the former name of the listed entity - as a car subscription service in May 2019. At that time, Collaborate also owned DriveMyCar which it had acquired in 2015, as well as peer-to-peer marketplaces Rentoid for household items, Marketboomer for procurement, and caravan rental network Caramavan which later faced tougher competition from Airbnb-inspired Camplify (ASX: CHL).
Carbar was founded three years earlier than Carly in 2016, but unlike its competitor it was financed privately, albeit with publicly-listed companies such as Insurance Australia Group (ASX: IAG) and Seven West Media (ASX: SWM) taking part in a $28.9 million raise in 2022. In 2021 it had secured $50 million in funding from Global Credit Investments.
"Carbar was one of the pioneer car subscription brands to market. There are substantial benefits in merging with Carly, bringing each group more scale and efficiency," says Carbar founder and CEO Des Hang.
"Both Carbar and Carly have complementary offerings, targeting different segments and channels of the market. Bringing the businesses together will leverage the advantages of each brand.
"Through merging with Carly, we’re aiming to not only better service our existing customers, but to also push more aggressively into servicing the emerging novated subscription market. We strongly believe this is one of the best avenues for the car subscription offering, due both to the flexibility for employees and creating potential tax savings through current incentives.”
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