Westpac is understood to be about to finally fire the starting gun on the sale of its $10 billion-plus dealer finance and auto loan portfolio, with Morgan Stanley currently lining up bidders.
It is understood that prospective suitors are currently signing nondisclosure agreements being handed out by Westpac’s adviser, Morgan Stanley, ahead of receiving information memorandums for the sale that could reap the Australian bank between $1bn and $2bn in proceeds, according to estimates.
The sale plans have been on the cards for at least two years, but a process has taken time due to the introduction of a new IT system to manage a fixed commission environment surrounding law changes for car loans aimed at curbing hefty interest payments for consumers.
They now come at a time that a strong improvement in car sales is fuelling lending in the sector, with automotive lending up 24 per cent in the last three months of last year compared to the previous three months.
This was as November new car sales marked the first instance of monthly year-on-year growth for two and a half and a half years amid the global pandemic.
It also comes as Quadrant Private Equity launches an initial public offering for its Peter Warren Automotive business, that could see the business valued at more than $1bn.
Parties expected to enter the competition include Kohlberg Kravis Roberts, Cerberus Capital Management, Blackstone, Bain Capital, Affinity Equity Partners, BGH Capital and JC Flowers.
Apollo Global Management, TPG Capital and The Carlyle Group could also be around the hoop, given that Apollo and TPG lined up for ANZ’s UDC finance business in New Zealand that sold to Shinsei Bank for NZ$762m last year and Carlyle bid for ANZ’s $8.3bn Esanda dealer finance unit when that was for sale in 2015.
Esanda was purchased by Macquarie Group, making it one of the major players in the space, but it would likely be ruled out of the contest due to competition issues.
The portfolio may also make sense for non-bank lenders like Latitude.
Westpac last year started moving forward on plans to sell more than $4bn worth of non-core wealth assets, as the bank focuses on mainstream banking and returns funds to its core operations amid the challenging COVID-19 environment.
Operations identified as non-core for the bank, along with its dealer finance and auto loans portfolio, is its BT Panorama wealth management operation, which is expected to shortly be placed up for sale, estimated to be worth between $700m and $1bn.
Westpac, with its Panorama wealth management platform, is the largest platform provider in Australia. It has a 19 per cent market share, and started a price war in 2018 by lowering its platform pricing.
Westpac sold its Pacific Bank to Kina Securities for $420m while its general insurance division was offloaded late last year to Allianz for $725m.
It has also offloaded its vendor finance business last year to Cerberus Capital Management.
The operations all sit within Westpac’s recently formed Specialist Businesses unit overseen by Jason Yetton.
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