More in store for Pacific Equity Partners after SG Fleet bid

Pacific Equity Partners may not stop at SG Fleet when it comes to deals in the fleet leasing sector. Picture: iStock

A purchase of SG Fleet by Pacific Equity Partners would open the door to further industry consolidation, say sources, with its $1.2bn offer for the company backed by investors.

The listed fleet leasing services provider announced to the market on Monday that PEP had been given exclusive due diligence access on the company until the end of next week (November 29) after offering $3.50 per share, a 31 per cent premium to its $2.67 closing price on Friday.

The shares hit a 2024 low of about $2.26 in January and highs of about $3.39 in August, so some shareholders spoken to by this column saw the deal on offer as it stands as good value.

The obvious play is a tie-up between FleetPartners and SG Fleet, given the compelling synergy benefits.

But SG Fleet’s management and board is said to have always refused to deal with FleetPartners over a merger since Fleet Partners (previously called Eclipx) rejected an $805m buyout proposal from SG Fleet in 2018.

PEP would be more open to talks, say sources, and would take a pragmatic approach.

A sale of SG Fleet is no major surprise.

DataRoom reported in July that its 53 per cent South African shareholder Super Group was searching for a buyer for its interest in the company through Bank of America.

At that time, PEP was believed to be among a number of possible buyers, as reported at the time, as were other private equity firms.

More recently, it was believed to be the last group standing.

But the timing of the deal and the fact that PEP came forward when it did was considered left-field because the Sydney-based private equity firm has a lot on its plate.

Not only is it now conducting exclusive due diligence on SG Fleet, it has been doing so on aged care provider Opal.

PEP has also been looking at retirement village operator Aveo; is one of two final suitors for the $1bn sale of Waste Services Group; is in the second round for Singapore Post’s $1bn portfolio of Australia assets; and is said to be among the groups that may buy the $1bn MotorOne.

PEP will also look at the Incitec Fertilisers chemical distribution unit when it hits the market next year.

The reason why it has so much on its plate is that it is cashed up after selling a number of businesses at the top of the market amid the Covid-19 pandemic about three years ago.

It also coincides with a raising for a new $2bn-plus fund.

PEP is working with advisers Barrenjoey and Citi on SG Fleet, which is advised by Bank of America.

Market analysts say synergies existing in the industry are significant and consolidation makes increasing sense.

Companies like SG Fleet were in favour last year as customers capitalised on government rebates for electric cars.

But corporates are now moving away from electric vehicles.

For the year to June, SG Fleet’s net profit increased 6.7 per cent to $89.7m as it said battery electric vehicle sales growth slowed to about 8 per cent of total new vehicle sales in Australia in the second half of the financial year, and were down sharply in New Zealand with an end to the government’s Clean Car Discount.