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Bridget Carter

KKR keen on Eclipx Group’s Right2Drive unit

Bridget Carter

Global private equity giant Kohlberg Kravis Roberts is believed to be circling Eclipx Group’s Right2Drive vehicle rental business, along with Macquarie Group.

Other parties thought to be in the mix are insurers such as Insurance Australia Group, Allianz and Suncorp.

Grays Online, meanwhile, is believed to be in the cross hairs of two parties — a Canadian-based suitor and Bauer Media, which owns Parkers used car guide in Britain.

However, some analysts say Grays Online could be attractive to the Catch Group.

KKR’s interest in Right2Drive is believed to be through its recently acquired lender Pepper Group, while the former ANZ-owned Esanda dealer finance business now controlled by Macquarie is thought to be the party hoping to acquire the operation.

Eclipx signalled that it would offload Grays Online and Right2Drive during its latest trading update that triggered the collapse of a merger with rival McMillan Shakespeare.

Working on the sale of the businesses is thought to be UBS, which has been advising the company during its merger talks.

When McMillan Shakespeare was poised to buy Eclipx, its strategy was also to offload Grays and Right2Drive, which were both deemed to be non-core.

Earlier, it was predicted that Gray’s and Right2Drive comprised about 20 per cent of the overall value of Eclipx.

Now the thinking is that the company will have to offload the operations at a steep discount.

Eclipx purchased Grays in 2017 for $179 million, but many doubt it would now achieve a price even close to that.

Right2Drive was acquired by Eclipx in 2016 for $67m as a business that provides rental replacement vehicles to “not at fault” drivers that have accident-damaged cars requiring repair.

Its book is worth about $75m, and some say it is a bargain for any acquirer that can pick up the operation for about $50m.

In its latest market update, Eclipx said Grays Industrial and Insolvency had continued to underperform and had outweighed the continuing growth in motor vehicle auctions, while Right2Drive’s results for the past two months had been affected by factors including softer trading conditions and a reassessment of recovery rates on some debtor groups, including its non-insurer-based exposures, which had resulted in a higher level of provisioning and the impact of process errors identified following queries arising from due diligence.

The results had pushed Eclipx’s net profit down 42.4 per cent compared to the first five months of the 2018 financial year.

When Eclipx bought the operation it was losing money and the plan was to close down various operations and turn the automobile parts of the business into a profitable operation. The wine operation was also retained. However, vehicle sales are struggling, causing the poor result from Grays.

Insurers would see Right2Drive as complementary to their existing strategies, while Grays Online would also add scale for any existing auctions business, according to market analysts.

In recent months, Quadrant Private Equity was believed to be circling Grays Online but is no longer a possible suitor.

The reason why Catch Group, co-founded by Gabby and Hezi Leibovich, has been named as a possible buyer is because the company generates revenue from online shopping websites such as CatchofThe Day, Mumgo, Grocery Run and Scoopon. It also revived failed children’s clothing brand Pumpkin Patch in 2017 and transformed the operation into an online business.

Earlier, Eclipx had told the market that it had received a number of approaches for its Right2Drive and Grays Online operations, and that it planned to use the proceeds from the sale to repay debt.

Bridget Carter
Bridget CarterDataRoom Editor

Bridget Carter has worked as a writer and editor for The Australian’s DataRoom column since it was launched in 2013, focusing on capital markets, mergers and acquisitions, private equity and investment banking. She has been a journalist for more than 18 years, covering a broad range of events and topics, including high profile court cases and crimes, natural disasters, social issues and company news.

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Original URL: https://www.theaustralian.com.au/business/dataroom/kkr-keen-on-eclipx-groups-right2drive-unit/news-story/50a7e35e109d67494442613e2ca28e16