Two of the country’s biggest contract hire companies are believed to be very close to being sold.
ING has confirmed it is talks to sell its Car Lease division in a deal reported to be worth £3.5 billion, while the Royal Bank of Scotland (RBS) is keen to offload Lombard Vehicle Management.
Not since the merger of Lex and Autolease in 2009 to create Lex Autolease, the UK’s biggest contract hire company in terms of fleet size, will the industry have seen such a seismic shift in ownership.
In a statement to Fleet News, the Dutch bank confirmed the sale of ING Car Lease is a possible option and said it was “reviewing strategic alternatives” for the division.
It said: “ING has confirmed that it is currently reviewing strategic alternatives for ING Car Lease, including discussions with third parties interested in a potential acquisition. Any further announcement on this matter will be made if and when appropriate.”
Industry expert Professor Colin Tourick explained: “For decades banks have been trying to find synergies between their vehicle leasing and banking divisions and success has not come easy.
“Contract hire companies require vast amounts of capital and have been very safe places for banks to put their money, but bankers have disliked the volatility of a market where profits are so heavily dependent on the performance of the used car market.
“So we shouldn’t be surprised that sometimes they’re keen to invest and other times they’re keen to divest. It’s always happened and will continue to happen,” said Tourick.
ING Car Lease was eighth in the FN50’s list of the UK’s top 50 contract hire companies, with a risk fleet of 47,615 vehicles.
Overall, it has approximately 240,000 vehicles across eight countries in Europe. The company’s other leasing businesses, including ING Lease and ING Commercial Finance, would not be affected by this announcement.
ING received 10bn Euros from the Dutch government in 2008 to shore up its balance sheet as the banking crisis sent shockwaves around the world. In January 2009, it received state guarantees for 80% of its loan portfolio worth 27.7bn Euros.
The disposal of the car leasing division would improve ING’s capital position and might help the company pay back the remaining 3bn Euros it owes the Dutch state on its original 10bn Euro loan.
Potential suitors include LeasePlan, Arval and BMW Financial Services’ Alphabet. However, while Alphabet is keen to expand, it is believed to be more focused on organic growth than acquisition.
More likely is GE Capital, which is keen to buy after losing out in the sale of Masterlease at the end of last year. GE was believed to have reached a period of due diligence after nine months of talks before it was gazumped by Investec.
Leasedrive Velo was handed the running of Masterlease and the merger of the two businesses was confirmed with the recent rebranding of Leasedrive Velo to Leasedrive (Fleet News, May 26, 2011).
However, GE Capital is also believed to be in advanced discussions with RBS about Lombard Vehicle Management.
Fleet News first reported that Lombard, number three in the FN50 with a risk fleet of 81,800 vehicles, was up for sale more than a year ago. And, in the past fortnight Sky News has claimed a deal with GE is close to being finalised, which if true probably puts GE out of the running for ING Car Lease. Neither party would confirm discussions.
Lombard serves a variety of small and large fleets and has been subject to speculation considering RBS’s objective of reducing the size of its balance sheet by selling non-core assets.
The acquisition of Lombard Vehicle Management by GE and its subsequent merger could knock LeasePlan off its number two ranking in the FN50 with the new business boasting a risk fleet of more than 127,000 vehicles.