Societe Generale bets on electric vehicle sharing in $5.5bn deal with London-based TDR Capital

Jan 6, 2022 | News

Societe Generale is betting on the sharing economy and the shift to electric vehicles as it aims to make its vehicle-leasing subsidiary ALD a core pillar of its business, the French bank said on 6 January, setting out a merger between ALD and peer LeasePlan.

Under the agreement with LeasePlan’s current owners, a consortium led by London-based TDR Capital, ALD will acquire 100% of the company in a cash-and-share deal totalling €4.9bn ($5.54bn), SocGen said.

The lender said it will retain a majority stake of 53% in ALD following the deal, and commits to remaining so, with a 40-month lock-up period from closing, expected by the end of the year.

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The combined entity — NewALD — will be well-positioned to benefit from the automobile industry’s underlying trends, especially the shift toward usership and away from ownership, and the growing predominance of electric vehicles, SocGen said. NewALD will be a leading player in the market, with a combined fleet of around 3.5 million vehicles, the bank added.

The acquisition will be paid with €2bn in cash, with LeasePlan shareholders also receiving a 30.75% stake in ALD, SocGen said. ALD, which was listed in 2017, will finance the cash part with a rights issue amounting to €1.3bn and €700m in surplus cash.

The merger will be 20% accretive to NewALD’s earnings per share from 2023, and will also create value at the group level, adding at least 5% to earnings and around 80 basis points to return on equity from 2024, SocGen said. The transaction will reduce group capital by around 40 basis points, the bank said.

The acquisition is aligned with current dividend pay-out policy of a 50% of underlying group net income, as well as capital-allocation policy focusing on the group’s most profitable businesses, SocGen said.

NewALD will in time become a third pillar of SocGen’s business, alongside retail banking & insurance and corporate & investment banking, Chief Executive Frederic Oudea said. The transaction is “a major step” for ALD, which has been positioned to take advantage of “the tremendous growth potential in the sustainable mobility market,” Oudea said.

Private-equity firm TDR and its partners bought Amsterdam-based LeasePlan for €3.7bn in 2015, later ditching a plan to list it.

SocGen shares slipped in October when reports of a tie-up between ALD and LeasePlan emerged, with analysts at Jefferies raising concerns about the demands on the lender’s excess capital. Investors would focus on the price of a deal, which could also put at risk SocGen’s organic growth and dividend plans, Jefferies said at the time.

Source: FN London

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