ADESA, Inc. - Acquisition by Minnesota Power & Light in 1995

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.