The French bank Société Générale was already happy with its subsidiary ALD. Now there is even more reason to be delighted.
The profitable car lease company is taking over its Dutch counterpart LeasePlan, it was announced on Thursday. Together, the two companies – already global players – could dominate the car leasing market.
The merged company will have a fleet of 3.5 million cars, of which just over half (1.8 million) now belong to LeasePlan.
Both companies rent out cars and manage fleets for the business market. They are also active in long-term car rental to consumers.
The car rental offers Société Générale a solid return. This is no superfluous luxury for the bank, which sees its profitability under pressure due to low interest rates and stricter capital requirements. The competing French bank BNP Paribas is also active in car leasing with its subsidiary Arval.
Investors are positive
LeasePlan is now owned by a group of private investors, including the British investment company TDR Capital and the Dutch PGGM, the administrator of Pensioenfonds Zorg en Welzijn.
ALD will pay them 4.9 billion euros, partly in cash, partly in shares. These give the current LeasePlan owners an interest of more than 30 percent in the new merged company. Société Générale remains the majority shareholder, with a 53 percent stake.
The merger should be ready by the end of this year, if regulators agree. Danish ALD chief executive Tim Albertsen takes the lead.
Investors and analysts reacted enthusiastically to the news on Thursday. ALD’s share price rose by 8 percent.
After a corona dip in 2020, when there was less business traffic, the car rental industry is experiencing golden times. In the third quarter of last year, ALD posted a record profit of 258 million euros.
Remarkably, the leasing companies are benefiting from the problems in the car industry, where chip shortages lead to faltering production and long delivery times.
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Companies and consumers who have to wait a long time for their new car can rent one in the meantime. Or they turn to the used car market, where the leasing companies get rid of their old rental cars. As a result, companies such as ALD and LeasePlan can charge higher prices for their used cars.
Interestingly enough, the leasing companies are profiting from the problems in the car industry
The merger fits in with the trend of scaling up that has been going on in the sector for years. When Société Générale acquired ALD from Deutsche Bank in 2001, it was already aware that concentration would become important. The bigger your company, the easier it is to keep your costs low and be at the forefront of innovation. You will also have a stronger position in negotiations with the manufacturer where you purchase the cars. The French bank allowed ALD to grow rapidly, partly through acquisitions.
Also read: Is Leaseplan really canceling the IPO because of ‘market conditions’? (2018)
In 2017, ALD was the first major leasing company to be listed on the stock exchange in Paris. Only 20 percent of the shares are traded there. The rest has remained in the hands of Société Générale. This listing was partly intended to finance new acquisitions.
ALD is active in 43 countries, mainly in Europe, Asia and South America. In the Netherlands, the company not only rents out cars, but also electric bicycles for the business market.
The acquisition of LeasePlan should generate 380 million euros in annual savings. It is not yet clear to what extent this will affect the more than 8,000 employees of LeasePlan, which is headquartered in Amsterdam.
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