Cox Automotive Inc, owner of the Autotrader online automobile market and Kelley Blue Book car valuation service, said it would buy Dealertrack Technologies Inc (TRAK.O) in a deal valued at $4 billion.
The $63.25 per share offer represents a 59 percent premium to Dealertrack's Friday close. The stock was trading at a record $62.74.
The equity value of the deal is $4 billion, based on the number of shares outstanding and options and warrants issued since the company last reported its share count publicly on May 11, Dealertrack Technologies said in a mail.
Shares underlying the convertible debt are also included in the equity value, the company said.
The deal will help Cox Automotive cement its place at the top of the automotive inventory management software market, Stifel Nicolaus & Co analyst Gur Talpaz said.
Cox's vAuto business provides software that analyzes market data to tell car dealers which are the best models to stock.
"I think the premium is warranted, given the strategic value that (Dealer)track offers to Cox," Talpaz said.
"It really gives you a very clear leg up versus your competitors. So it's a good move."
While vAuto is the market leader, Dealertrack is No. 2, Talpaz said. CDK Global (CDK.O), spun out of payrolls processor Automatic Data Processing Inc (ADP.O) in 2014, will be the main rival for the combined company, the analyst said.
Cox, the automotive arm of media company Cox Enterprises, said it would fund it through a $1.85 billion loan arranged by Citigroup Global Markets, a $750 million equity investment from BDT Capital Partners and existing credit facility.
A rival bid was not likely, Talpaz said. "I don't know of anybody that has the pockets to make this happen, at least on an all-cash basis."
Analysts from seven of nine brokerages covering Dealertrack's stock, rate it "buy" or higher, including Stifel's.
The companies said they expect the deal to close in the third quarter of 2015.
BDT & Co and Citigroup Global Markets are financial advisers to Cox Automotive while Evercore was advising Lake Success, New York-based Dealertrack.
Dealertrack's shares closed up about 58 percent at $62.98 on Monday.