Shift plans to acquire Fair’s dealer listing marketplace assets for $15 million

News

Online used-vehicle retailer Shift Technologies said Tuesday it is acquiring the dealer listing marketplace assets of Fair Technologies, a vehicle retailing platform, for $15 million in cash and 2.5 percent equity.

In its reasoning for the deal, Shift said it wants to establish an online marketplace presence where dealers and independent sellers can list their cars alongside Shift’s inventory. The company said that will let its customers access a wider selection of vehicles for sale.

Shift wants the dealer marketplace ready to roll out in the second quarter.

“When we looked at our roadmap for the long-term, it felt like it would be at least two years before we could build this ourselves,” Shift CEO George Arison said during a Tuesday earnings call with analysts and investors.

Fair CEO Brad Stewart approached Shift about the work Fair had done on its online marketplace platform, Arison said. The marketplace has been in development for 18 months and the technology is “complementary” to what Shift does, Arison noted.

Fair, at one point an app-based used-vehicle subscription service, announced its intent to convert to an online vehicle marketplace model last year.

Lead-up to deal

Last summer, Stewart told Automotive News that the company had stopped taking new subscription and lease customers as it planned to convert its used-vehicle subscription service into a digital vehicle marketplace as soon as early 2022. Stewart, who joined Fair as CEO in May 2020, said the subscription business was capital-intensive and difficult to scale.

As of August 2021, Fair had an estimated 5,000 to 10,000 vehicles remaining in its inventory. Stewart estimated on Tuesday that the company had more than 5,000 vehicles and consumer contracts remaining. Fair held vehicles on its balance sheet under its subscription and leasing model.

Last year, Stewart said Fair’s marketplace model instead would use its technology to enable a vehicle transaction between dealerships and consumers, including finance and insurance.

He told Automotive News on Tuesday that Fair’s leadership team considered both operating its own marketplace and combining with another company. The company ultimately opted for combining, Stewart said, and Shift was identified as the best fit.

“Historically, they’ve only, for the most part, offered cars that they’ve purchased and refurbished on their e-commerce platform, and this is them fulfilling what they articulated in their initial public filing, which is to ultimately try to be an end-to-end leading e-commerce player,” Stewart said Tuesday.

Fair’s assets — including the brand name, the technology platform and intellectual property — are “hopefully a major step forward for them being able to fulfill their vision,” he added.

Fair intends to sell its existing consumer contracts, vehicles and other receivables to CFAM, of Dallas, Stewart said. Both transactions are expected to close in the second quarter.

Stewart said he does not yet know what his role will be going forward, but said of Shift: “I’m incredibly supportive of their vision, I’m a believer in them and I think this is going to make their company much stronger. And so I’ll do my part to make it work.”

Fair’s subscription service enabled consumers to drive a vehicle after paying a start fee, followed by a monthly payment. Roadside assistance, limited warranties and routine maintenance were included. The company was founded in 2016 by Scott Painter, who left the CEO role in October 2019. Fair had raised money, including in a $385 million funding round in 2018 led by SoftBank, but faced challenges in becoming profitable.

Financial details

Shift plans to fund the transaction via a $20 million debt facility with SoftBank Group Corp., Arison said.

Shift expects both the Fair assets acquisition and notes purchase to close in the second quarter.

Lindsay VanHulle contributed to this report.

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