Search for SG Fleet buyer stuck in the slow lane, but merger makes sense

Listed fleet leasing groups are perennial takeover targets.

SG Fleet investors were told when the group reported its results last month that major South African shareholder Super Group had called off the sale process for its stake, being unable to find a buyer.

Apparently, the South African logistics company wanted a buyer to pay cash for its 53 per cent stake. It sought a buyer through Bank of America, but some of the private equity firms that took a look had struggled to make the numbers work.

Other strategic parties that could achieve better synergies on a deal were only prepared to pay with their scrip.

Adding to the challenge has been the extra money groups like SG Fleet have been making through the take-up of electric vehicles by their customers, causing the share price to rally and putting the target out of reach. But the understanding now is that a couple of buyout funds are back around the hoop.

SG Fleet’s shares have come off the boil, with the hype around electric vehicles abating, which could make a deal more affordable for a private equity player. The groups thought to be most interested are local funds.

Anchorage Capital Partners has looked at the rental car business in the past, but SG Fleet would probably be too big. Other possibilities are BGH Capital, Pacific Equity Partners, Quadrant Private Equity or Asian fund Affinity Equity Partners.

The listed fleet leasing groups are perennial takeover targets, and what makes most sense is a merger of them.

It’s been tried before, but a deal has never got there. At the same time, novated leasing company Smart Group, which has previously been bid for by TPG Capital and Potentia Capital, is also believed to be assessing its options over its future. And Fleet Partners is always seen as a logical candidate to take part in any industry consolidation, given it has been planning an SG Fleet tie-up in the past and private equity firms constantly kick the tyres.

In July, SG Fleet’s share price reached its 2024 peak at $3.15, but now it has come back to $2.56 with its market value at $869m.

Companies like SG Fleet were in favour last year as customers capitalised on government rebates for electric cars, but demand has fallen.

For the year to June, SG Fleet generated $89.7m in net profit, down from $75.2m in the previous corresponding year, as electric vehicle sales growth slowed in Australia and fell sharply in New Zealand, and provisions and impairments were driven by softening used electric vehicle values.

The company previously said electric vehicles accounted for 37 per cent of quoting and orders in SG Fleet Novated channels, up fivefold on the first half of 2023.

The Wall Street Journal reported at the start of the year Hertz was selling about a third of its global electric-vehicle fleet.

SG Fleet’s rival McMillan Shakespeare was planning to buy Fleet Partners – then known as Eclipx – for about $912m but backed out.

SG Fleet purchased rival LeasePlan in 2021 for $387m.