ADESA, Inc. - Company Profile, Information, Business Description, History, Background Information on ADESA, Inc.

13085 Hamilton Crossing Boulevard
Carmel, Indiana 46032

Company Perspectives:

ADESA, Inc. helps its business-to-business customers throughout North America succeed by providing a comprehensive array of superior, customer-focused vehicle remarketing and financing services.

History of ADESA, Inc.

ADESA, Inc. is one of the leading providers of wholesale used vehicle auction services and financing in North America. The company operates more than 50 used vehicle auctions and 30 salvage vehicle auctions, as well as loan offices affiliated with each. ADESA also owns a vehicle importation service, a web-based auction service, auto reconditioning facilities, and other related subsidiaries. The company controls about one-fifth of the North American auto-auction market.


ADESA officially traces its roots to 1989, when Mike Hockett formed a company called Auto Dealers Exchange Management, Inc. in Birmingham, Alabama. Hockett had grown up in the car business in Indianapolis, Indiana, where his father had owned a used car lot and a Ford dealership before taking control of an auto auction in 1964. Young Hockett began to manage the latter in 1966, running it for more than a decade. In 1979 he joined with a partner to open a vehicle auction in Indianapolis, and they subsequently bought others in Illinois and in Birmingham, Alabama. In 1989 he split with his partner to manage the Birmingham auction on his own.

Several firms had begun buying up clusters of the nearly 400 U.S. wholesale vehicle auctions in the 1980s, and Hockett now sought to grow his company in a similar manner. Over the next several years he bought other auctions near Cincinnati, Memphis, and Lexington, Kentucky, and in 1992 he and Gary Pedigo, president and co-owner of Indianapolis Auto Auction, formed ADESA (Auto Dealers Exchange Services of America) Corp., basing it in Indianapolis. Hockett, 49, was named president and CEO. The company's auctions had sold 173,000 vehicles, worth close to $1.4 billion, in 1991. The firm employed 925.

Wholesale vehicle auctions fell into two categories: consignment sales, where dealers, banks, fleet operators, and wholesalers sold vehicles, some of them for salvage; and factory sales, at which car manufacturers auctioned cars repurchased from rental companies to their franchised dealers. ADESA's auctions were divided equally between the two types. The company's revenues were derived primarily from fees it collected on each sale.

Each of the firm's sites typically held two auctions per week, at which cars were sold as often as once every five seconds. All buyers at the auctions were licensed dealers, and the general public was not admitted. In addition to auctioning vehicles, the firm also reconditioned cars, transported them, and provided financing to dealers. A total of 43 percent of the company's revenues came from auctions, while 25 percent was derived from reconditioning and 19 percent from transportation.

Initial Public Offering in 1992

Shortly after forming ADESA, Hockett and Pedigo announced plans to sell shares to the public to help fund further acquisitions, as well as to pay for construction of a new auction in Buffalo, New York, of which the firm would own 80 percent. In April 1992 two million shares of stock were sold at $11.50 each. Hockett retained controlling interest, with 56 percent of the total.

After the initial public offering (IPO) was completed, the firm purchased the remaining 20 percent of the Buffalo auction, and the fall of 1992 saw the purchase of Concord Auto Auction in Acton, Massachusetts, for $16 million. Revenues for the year topped $45 million, up from nearly $29 million the year before. Net earnings stood at $3.6 million.

In the spring of 1993 ADESA acquired two auctions in Knoxville, Tennessee, which it would continue to operate until a new, larger facility in the area was completed. In July the firm entered Canada, purchasing Montreal Auto Auction in Quebec province, the second largest auto auction in the country. ADESA would later build a new facility there. The company also secured $20 million in bank loans to fund more growth, and in the fall sold an additional 2.5 million shares of stock.

ADESA's Canadian operations were soon expanded with the acquisitions of auctions in Halifax, Nova Scotia, and Ottawa, Ontario. The latter site offered a salvage auction every other week, which was the company's first foray into the sales of wrecked vehicles for parts.

In January 1994 the firm acquired a company called Automotive Finance Corporation, which would enable it to better provide customers with onsite financing. The following month Gulf Coast Auto Auction, Inc. of Bradenton, Florida, and Northfield Auto Auction Corp. of Cleveland also were acquired. Their names were changed to ADESA Sarasota/Bradenton and ADESA Cleveland, respectively, in keeping with the company's usual practice.

In the spring the firm bought a vacant General Motors (GM) plant in Framingham, Massachusetts, for $8 million, to which it would relocate its Concord auction. The 2.9 million-square-foot facility would comprise the nation's largest indoor auction site. It was primarily purchased to enable ADESA to hold auctions in the winter without interruptions from bad weather.

The summer of 1994 saw an agreement reached with General Motors Canada to sell 42,000 rental repurchase vehicles over a three-year span in that country. In August another auto auction was acquired in Miami, Florida, and in September one was purchased in Austin, Texas. Two months later Gary Pedigo sold most of his stake in ADESA and left the company to buy a Chevrolet dealership in Indianapolis.

Acquisition by Minnesota Power & Light in 1995

In January 1995 Minnesota Power & Light (MP&L), an electric utility company, bought 80 percent of ADESA's stock for $162 million. ADESA management, who held most of the remainder, would remain in charge. The deal brought more money for growth, while also helping to diversify the power company's portfolio. MP&L had earlier purchased wastewater treatment, mining, and paper milling and recycling operations, though it had sold the latter two to fund the acquisition of ADESA.

In mid-1995 ADESA began construction of a new auction facility in Ottawa, Ontario, and began tearing down a former Johns-Manville asbestos plant in New Jersey to build an auction there. In the fall the company's Canadian division merged its salvage operations with Impact Auto Auctions of Canada, after which it would operate salvage auctions in six locations. The latter half of the year also saw ADESA purchase an auction in Billings, Montana, and reorganize its top management to improve efficiency. During the year 475,000 cars were sold at the firm's auctions, and its finance arm loaned more than $100 million to 2,400 dealers.

In early 1996 MP&L boosted its ownership stake in the firm to 83 percent, and ADESA bought another auction near Milwaukee. In the summer, after founder Mike Hockett and several other top executives had reportedly attempted to purchase the firm and take it public, the utility exercised its option to buy them out. After the $44 million deal was completed, the head of ADESA's Canadian unit, James Hallett, was named president and CEO. In the fall ADESA bought an auction in Pennsylvania and three in Texas. Earnings for the year topped $3.7 million on sales of $183.9 million.

Completion of the company's two most ambitious auction facilities, the former factory sites in Massachusetts and New Jersey, were now putting a strain on its finances. Spending on the latter had ballooned from $18 million to $37 million, and $20 million had been spent at the Framingham site, double the original estimate. In the latter case the indoor auction's advantages were offset by the challenges of efficiently operating such a large facility, and two-thirds of the 2.9 million-square-foot building had been torn down. Because of these and other financial problems, new CEO Hallett began taking a more measured approach to growth by slowing down the rate of acquisitions, adding services at existing sites, and marketing ADESA's business to new customers.

The spring of 1997 saw a stake bought in an auction in Sacramento, California, and the sale of the firm's Bradenton, Florida auction. In the fall the company spent $15 million to double its vehicle-hauling fleet to approximately 180 vehicles, and created a separate business, Great Rigs, Inc., to perform vehicle transport duties for it and other companies. ADESA also bought 28 acres in Halifax, Nova Scotia, to build a new auction facility there.

In 1998 the firm formed an alliance with competitor ADT Automotive, through which ADESA's finance unit would offer loans at all 28 ADT auctions. In the spring of 1999 the company bought auctions in Des Moines, Iowa, and Vancouver, British Columbia. Construction of an additional Canadian auction near Calgary, Alberta, was started in October, and it began operations the following year.

Adding More Than Two Dozen Auctions in 2000

In early 2000 ADESA bought an auction in San Diego and a partially completed one near Los Angeles. The firm also was preparing to reopen its Concord, Massachusetts site after exceeding the capacity of its Framingham location.

In June the company bought Canadian Auction Group (CAG), the owner of 13 auctions and dealer financing sites around Canada. CAG had sold 200,000 vehicles and taken in $68 million in the most recent 12-month period. ADESA also acquired the remaining interest in Impact Auto Auctions of Canada that it did not own.

Less than a week later, the company reached an agreement to buy eight auctions from ADT Automotive and a ninth from Manheim Auctions. Their combined sales for the previous year was put at $130 million. The nine sites were located in Phoenix, San Francisco, Atlanta, Kansas City, Seattle, Colorado Springs, Tampa, Orlando, and in Clearwater, Florida.

The $251 million deal had come about after Manheim agreed to buy ADT's chain of auctions, full ownership of which would violate federal antitrust laws. Afterward, ADESA moved its finance offices out of the 28 former ADT sites that Manheim would keep. In August, two additional auctions were purchased in Arkansas. When those deals were completed, ADESA would own 57 auctions in the United States and Canada.

In December 2000 the firm bought International Vehicle Importers, Inc., a Flint, Michigan-based vehicle importer. ADESA's holdings now also included a half-dozen auctions that specialized in heavy equipment and trucks, a vehicle remarketing company called PAR, and AutoVIN, a firm that performed inspections of cars coming off-lease.

Acquisition of APC and ComSearch in 2001

January 2001 saw the purchase of two Rhode Island-based firms, Auto Placement Center, Inc. (APC) and ComSearch, Inc., for a total of $62.4 million. The latter was a web-based provider of parts location and insurance adjustment audit services, and APC ran eight salvage auctions in New England. ADESA also published the first edition of Global Vehicle Remarketing, a 68-page statistical report on the used vehicle industry. The publication was intended to inform the industry, media, and lawmakers, as well as help to raise ADESA's profile. A quarterly report, Pulse, was added later.

In May 2001 the firm bought an auction in Tulsa, Oklahoma, and in October Brian Warner was appointed president, with Jim Hallett remaining in charge as CEO. Later in the year, ADESA bought a salvage auction in North Carolina.

In the summer of 2002 the company was restructured to combine its marketing and sales departments, and the commercial remarketing staff was moved from offices to auction sites. The firm also sold its trucking unit, Great Rigs, Inc., and replaced its San Francisco-area auction with a new $60 million facility located on 230 acres. The 12-lane auction was California's largest. The site it replaced was later taken over by an ADESA Impact salvage auction.

The year 2002 also saw a new salvage auction opened in Orlando, Florida, and the firm's Industry Relations and Analytical Services department starting to supply monthly reports to the U.S. Bureau of Economic Analysis. ADESA recently had added other services to its portfolio, including AutoScan diagnostic certification programs, EndTrust end-of-term leasing services, Auction Management Computer Systems, and Micro 21 dealer software. The company's revenues reached $844 million during the year, with profits of $93 million.

January 2003 saw Brian Warner reassigned to head the company's Canadian operations, while Jim Hallett took back the title of president. In October the firm's parent, now known as ALLETE, Inc., announced that it would spin off ADESA as a separate entity. One share of ADESA stock would be issued for each share owned in ALLETE. The move was taken to increase shareholder value, as ADESA now accounted for almost two-thirds of ALLETE's revenues.

The fall of 2003 also saw a new auction facility opened near Atlanta, Georgia, to serve Chrysler Group dealers. The eight-lane auction was situated on 260 acres and featured a 90,000-square-foot reconditioning center. The company had by now also introduced LiveBlock, which enabled dealers to participate in auctions at certain sites via the Internet. ADESA had acquired the technology from a Canadian firm. The following spring saw the company move its headquarters to a new building in the Indianapolis suburb of Carmel, after first considering offers from several other cities.

Returning to Public Ownership in 2004

In June 2004 the spinoff from ALLETE got underway with the sale of 6.25 million shares of stock on the New York Stock Exchange. The remaining 93 percent of the firm's shares were distributed to ALLETE shareholders in September. ADESA had by now also issued $125 million in bonds, as well as securing $525 million in loan commitments from a total of 29 banks.

After the spinoff was complete ALLETE CEO David Gartzke left that firm to become CEO, president, and chairman of ADESA, which he had been helping run since the previous summer. The year 2004 also saw the firm open a new salvage auction in Sacramento, California, and an auction in Mexico, its first in that country. ADESA was now planning expansions to several of its existing sites, including Manville, New Jersey, and Montreal. The firm also was working with Toyota Financial Services to offer direct vehicle sales between dealers over the Internet. LiveBlock was now available at an increasing number of ADESA auction sites as well, with 6 percent of sales at such sites made to online bidders. Sales for the year topped $931 million, and income hit $105.3 million.

In early 2005 ADESA completed the repurchase of some 4.4 million shares of stock to boost its value. The firm also upgraded LiveBlock, which was now offered at most of its sites, so that bidders could view multiple auctions at the same time. Expansion continued during the year with the construction of a new salvage auction near Hartford, Connecticut. The firm's 2005 Global Remarketing Report projected continuing growth in the market, with U.S. used vehicle sales expected to rise from 42.7 million in 2004 to 44.4 million in 2005, and 47.7 million in 2009.

In more than 15 years of steady, sometimes rapid growth, ADESA, Inc. had assembled the second largest chain of used-vehicle auctions in North America. The company had added complementary businesses in financing, reconditioning, importation, and other services along the way, and was now expanding its Internet sales capabilities.

Principal Subsidiaries: ADESA Corporation, LLC; Impact Auto Auctions, Inc.; Automotive Finance Corporation; PAR, Inc.; AutoVIN, Inc.; ComSearch, Inc.; Automotive Recovery Services, Inc.; ADESA Importation Services, Inc.

Principal Competitors: Manheim Auto Auctions Inc.; Copart Inc.; Insurance Auto Auctions Inc.


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