Zenith/Leasedrive merger will create FN50 No8 business

Leasedrive Group and Zenith are set to merge following their rapid-fire acquisition by private equity company HG Capital, creating one of the country’s biggest leasing companies.

Leasedrive currently funds 17,865 cars and 3,007 vans, making it the 14th largest contract hire company with 20,872 vehicles. Zenith has a risk fleet of 27,310 – 24,800 cars and 2,510 vans – and is 12th in the Fleet News FN50.

The combined fleet would equate to 48,182 units, making the business the eighth biggest leasing provider in the UK.

Roddy Graham (pictured), commercial director at Leasedrive, told Fleet News that there were no plans to change the existing office support infrastructure of either business.

Zenith has recently expanded its head office in Leeds while Leasedrive has also invested in its Wokingham base.

He said: “We have spoken to some of our larger customers about the new investor and initial feedback has been positive.

“The most important thing is our customers and our staff.We are enormously proud of what we have got here and it would be very silly to do anything to jeopardise that.”

With sources suggesting that HG Capital hasn’t finished its spending spree, further acquisitions could boost Leasedrive and Zenith’s combined risk fleet even further.

Fleet News has learned that a number of FN50 companies are open to offers and would be prepared to sell to the private equity firm.

A spokesman for HG Capital said: “HG Capital has a track record of ‘buy and build’; it acquires complementary businesses and puts them together to add value.”

However, further acquisitions would have to be a good fit with a combined Leasedrive-Zenith operation.

HG Capital previously suggested it was interested primarily in car funding rather than commercial vehicles, which is supported by its choice of acquisitions so far: cars account for 86% of Leasedrive’s funded fleet and 91% of Zenith’s.

In the meantime, a new holding board has been created to manage the integration of the two companies and drive the business forward.

Jon Walden, who was Lex Vehicle Leasing managing director before it merged with Lloyds Autolease to create Lex Autolease in 2009, has been appointed chairman.

Walden, a member of the Fleet News Hall of Fame, recently left his position as chairman at franchised dealer group HR Owen. He will be joined on the board by Zenith chief executive officer Tim Buchan, Leasedrive chief executive David Bird and Andrew Land from HG Capital.

Graham said: “This group will look at how best to maximise the benefits of the larger business. If it needs strengthening further, Mark Phillips and myself may also join.”

Land has been the driving force behind HG Capital’s foray into the contract hire and leasing market and joined the Leasedrive board after completing the acquisition in December, last year.

He was also announced as a board member following the acquisition of Zenith, alongside HG Capital colleagues Nick Turner and Simon Cottle.

At the time of Leasedrive’s acquisition, Graham told Fleet News that HG Capital wanted to be “a real powerhouse in the leasing sector”.

By announcing the Zenith deal only weeks later, his assertion about HG Capital’s ambitions have been proved correct.

The private equity company has assets of £5.1 billion, serving more than 100 institutional investors, including private and public pension funds.

It operates across a range of sectors from healthcare to renewable energy, but has now identified the leasing sector as a core focus area.

Graham said: “We have two really well run and respected companies now with the same ambitious investor. It is far too early to even think about how best to leverage this scale to the benefit of our customers, but when we do, it will be done very carefully.”

HG Capital bought the 52% stake in Leasedrive owned by Lloyds Development Capital (LDC) and the remaining 48% owned by the senior management team before allowing both parties to roll over part of their investment/equity to share 20% in the new structure.

It means HG Capital has an 80% stake and leaves LDC and the management team with the remaining 20%.
The Zenith deal sees the private equity company acquire a majority stakeholding in the parent company of Zenith Vehicle Contracts Group from Morgan Stanley Global Private Equity (MSPE), subject to regulatory approvals.

A 60% stake in the top 20 leasing company was acquired by MSPE in August 2010.

All parties have remained silent about how much the deals were actually worth.

But in relation to the Leasedrive deal, LDC would have expected to recoup its original £80 million investment with interest, for its 52% share, and that would have been reflected in what the management team was also paid for the remaining share-holding.

It suggests a deal was struck that valued the company in excess of £150m.

Graham added: “I’ve been very impressed with HG Capital. I’ve worked with a number of investors over the years, but the way it has handled both deals and the speed with which it has been able to complete says a lot about it.

“It is an extremely pragmatic organisation and, while there are no immediate plans for further acquisitions, do I think it’s possible? Absolutely, yes.”

The BVRLA has welcomed HG Capital’s entry into the vehicle leasing market. The trade association’s chief executive Gerry Keaney said: “HG Capital’s entry demonstrates yet again that our sector is an attractive, low-risk part of the asset finance industry.

“New entrants, acquisitions and consolidation are hallmarks of a healthy sector, so we are likely to see more of this activity.”