Cazoo founder weighs £6bn merger with hedge fund tycoon Och's cash shell

·5-min read

The founder of Cazoo, the fledgling online car retailer, is weighing a merger with a 'blank cheque' company involving some of the best-known names in American finance and technology that could value it at as much as $8bn (£6bn).

Sky News has learnt that Alex Chesterman, who set up Cazoo just two years ago, has been holding discussions with Ajax I, which raised $750m when it floated in New York last autumn.

The special purpose acquisition company (SPAC) is among hundreds which have been established in the last year to find acquisition targets in sectors such as consumer technology, electric vehicles and healthcare.

Ajax I was launched by Daniel Och, co-founder of the hedge fund previously known as Och Ziff Capital Management, and Glenn Fuhrman, a former Goldman Sachs executive who helped create the vehicle which manages the wealth of the computing billionaire Michael Dell.

The star-studded Ajax I board includes Kevin Systrom, who co-founded Instagram; Anne Wojcicki, co-founder and chief executive of the genetic testing group 23andme; and Jim McKelvey, co-founder of the payments group Square.

Sources said this weekend that Ajax I was among a number of possible SPAC partners for Cazoo as it pursues plans to go public at an astronomical valuation.

Talks between the two sides have been taking place for several weeks, although there is no certainty that negotiations will progress to an advanced stage or that a deal will be reached.

Cazoo continues to explore other options, such as talks with other SPACs and a conventional initial public offering of the company, the sources said, while Ajax I is also understood to be evaluating a range of alternative targets for a deal.

If Mr Chesterman does consummate a deal with Ajax I or another US-listed SPAC, it could simultaneously represent the largest British company by valuation to date to go public through that route, and a blow to London's hopes of preventing homegrown tech companies from listing overseas.

This week, Rishi Sunak, the chancellor, welcomed a report by the former EU trade commissioner Lord Hill, which urged a liberalising of the rules relating to SPACs to help the UK claw back some of the ground lost to the US public markets.

On Monday, Deliveroo will publish an expected intention to float registration document ahead of an IPO expected to value it at as much as £7.5bn, while other tech companies including Darktrace and Wise are expected to follow suit in the coming months.

Sky News revealed last month that Mr Chesterman was working with bankers on a flotation or SPAC deal.

The entrepreneur, who also founded LoveFilm and Zoopla, the property portal, is being advised by Credit Suisse, Goldman Sachs and Numis on a review of Cazoo's options.

Some people close to Cazoo continue to believe that a London IPO is the most likely outcome given the concentration of its business in the UK and some European markets.

It recently acquired Cluno, Germany's leading car subscription service, while Auto1, a German-based online used-car dealer, saw its shares surge following its €8bn Frankfurt stock market debut last month.

Cazoo has already raised £450m from an array of blue-chip investors - a staggering sum for a British start-up founded just two years ago - such as D1 Capital Partners, Fidelity and General Catalyst.

Mr Chesterman himself would see his roughly-30% holding in the company worth more than £1.5bn from any transaction valuing it at £6bn.

The publisher of the Daily Mail would also hold a 20% stake worth about £1bn.

A Cazoo spokesman declined to comment this weekend on the talks with Ajax I and other SPACs, but said last month: "Cazoo is pioneering the shift to online car buying in the UK and, since our launch just over a year ago, we have already sold almost 20,000 cars to consumers across the UK who have embraced the selection, transparency and convenience of buying high quality used cars entirely online.

"As one of the UK's fastest growing businesses, with revenues of over £160m in our first year alone, it is not surprising that there is speculation around whether or when we might IPO but we do not comment on speculation and should we have an announcement to make on this or any other matter we shall do so at the appropriate time."

Cazoo, which sponsors the Premier League teams Aston Villa and Everton, says it is transforming the little-changed method of buying a used car by having it delivered to a customer's door within as little as 72 hours.

It claims to have become "the country's leading online car retailer" since its launch, even as the market for new cars has plummeted to sales levels not seen since the immediate aftermath of the Second World War.

Cazoo competes with rivals such as Cinch, which is owned by private equity-backed BCA Marketplace.

Mr Chesterman came up with the idea for Cazoo soon after leaving the property portal Zoopla, which he sold in a deal worth more than £2bn to the tech-focused buyout firm Silver Lake in 2018.

"Used cars are one of the last remaining consumer markets yet to benefit from any digital transformation," the entrepreneur said soon after its launch.

"Cazoo makes used car buying simple and convenient like buying any other product online today.

"We take away the need to travel, to haggle, to spend countless hours at a dealership and to risk any buyer's remorse."

Representatives of Ajax I have been contacted for comment.