In a stock deal valued at US$7.5 million, San Diego-based PeopleFirst.com bought Giggo.com, an online auto financing site owned by DaimlerChrysler AG.
PeopleFirst, which offers, among other things, "blank check" auto loans to car shoppers before they make a purchase, acquired all outstanding shares of Giggo. In return, DaimlerChrysler will hold a 23 percent stock equity stake in the new company Giggo.com Inc.
The company intends to continue operating under both the PeopleFirst and Giggo.com brand names.
PeopleFirst spokeswoman Liz Deakin said the merger will combine Giggo's heavier traffic load on its Web site with PeopleFirst's larger loan base. PeopleFirst now boasts American Express, JP Morgan Capital Corp. and DaimlerChrysler among its equity holders.
Giggo's Andreas Hinrichs, who will serve as the chief marketing officer for the new company, said strengthened market share was a driving factor in Giggo's interest in the deal.
"We will become instantaneously the leader in the online auto lending business," he said.
He added that the move gives the new company a "head start" against bricks-and-mortar lenders who will be flocking to the online arena in the coming years.
Deakin agreed that the move was made to grab larger market share in the online lending world. PeopleFirst had eyed hitting the point of profitability by the last quarter of 2001, but Deakin said the merger could move up the timetable by a quarter.
"It also makes us more competitive against traditional institutions," she said.
PeopleFirst has been in business since 1995, offering loans to consumers buying from both dealers and individuals. Giggo, in Fort Worth, Texas, has not only offered its own loans and services, but has sold them off to other lenders as well.
"The deal will make us more of a full-service lending house," Deakin said.
PeopleFirst CEO Gary Miller will retain his title in the new company. Giggo CEO Brian Reed will become the president of the combined operation. PeopleFirst's board of directors will be expanded by three members to 12 to include three representatives from DaimlerChrysler.