ALD launches €1.2-billion capital increase
A few days after the European Commission approved ALD’s multi-billion acquisition of LeasePlan, ALD today announced it is launching a €1.2-billion capital increase to help finance the deal. “This is a major milestone in creating the world’s leading sustainable mobility provider”, said ALD CEO Tim Albertsen (pictured).
ALD announced its takeover of LeasePlan in January of this year. Together, both companies have 3.3 million vehicles in portfolio and a combined presence in dozens of markets. An operation of this magnitude requires a lot of time and hard work – and the approval of the competition authorities.
With the EC’s blessing now a fact (on the condition that the merged company sells off subsidiaries in Czechia, Finland, Ireland, Luxembourg, Norway and Portugal to reduce its market dominance), the merger process is entering its final stretch.
The start of that final phase is marked by a capital increase by ALD – the only major leasing company listed on the stock market – which was announced by Mr Albertsen and ALD’s CFO Gilles Momper at a press conference on Tuesday.
Mr Albertsen began by painting a picture of the financial situation of the soon-to-be-merged company (a new name is yet to be announced). An overview.
- Post integration, the merged company is predicted to experience annual long-term fleet growth of more than 6%.
- Annual cost synergies, to fully materialize by 2025, will amount to €440 million – that’s €60 million more than projected in January.
- By 2025, the cost/income ratio will be 46% to 47% - best in class. “And that’s excluding used-car sales”, said Mr Albertsen.
- The pivot to sustainable mobility presents substantial growth opportunities, not just in the corporate and SME segments (respectively 5% and 6% annual growth until 2030), but also in the “underpenetrated” private market (12% annual growth until 2030).
- In terms of products, the global last-mile delivery market is predicted to grow 15% by 2030, subscription and flexible lease products by 20% by 2030 and EV registrations by 30% by 2025.
Electrification and sustainability
With an EV penetration of 27% in new car deliveries, ALD and LeasePlan are well above the industry average of 22%. “Thanks to our expertise in the EV space, ALD is uniquely positioned to benefit from the trend towards electrification”, said Mr Albertsen.
“The new company will become the natural choice for customers who are looking to electrify.” In other ways as well – multimodal solutions and multi-cycle leasing – the merged company is a trailblazer towards more sustainable mobility.
Another advantage of the merged company: sheer scale: “Together, we purchase more than 800,000 vehicles per year. That’s more than 5% of the total new car sales in Europe. We also purchase more than 4 million tyres per year. So we’re a very attractive partner for car and tyre manufacturers.”
Scale will also help the new company achieve leadership in the digital space. Last year, ALD and LeasePlan’s budget for digitalization (both operational and capital expenditure) added up to around €400 million. “Digital firepower”, Mr Albertsen called it.
But don’t take his word for the future success of the imminent marriage between ALD and LeasePlan.
- Taking into account ALD’s acquisition of its competitor, ALD’s debt rating with Standard & Poor is expected to be upgraded from BBB to A- at closing
- Fellow credit rater Fitch is expected to up ALD’s rating from BBB+ to A-.
These improved ratings provide ALD with wider access to funding, on improved terms. On top of that, Société Générale remains ALD’s major shareholder (with just under 80%) and an obvious source of funding (SocGen will participate for about €803 million in the current capital increase).
Cash and shares
Which brings us to the actual topic of the press conference – the capital increase. CFO Gilles Momper reiterated the financial terms of the €4.5-billion acquisition, which consists of
- a 'cash leg' of €1.8 billion (revised downwards from €2 billion, following the sale of LeasePlan USA), consisting of €600 million in debt financing and €1.2 billion in rights issue; and
- a 'share leg', consisting of a 30.75% share of ALD’s capital after rights issue completion and closing; and a share consideration increasing up to 32.9% in case of warrants exercise.
As mentioned, SocGen will invest €803 million in the rights issue. As a result, the bank will remain the long-term majority shareholder of the merged company, with a 51%-53% stake. LeasePlan’s current shareholders together would hold around 31%-33% of the merged company. “The free float will significantly increase, to circa 17%” of the merged company, at closing, said Mr Momper.
In total, 161.6 million new shares will be offered at a subscription price of €7.5 per share. The subscription period will run from 2 to 13 December, inclusive. The rights issue will be available in France only.
Image: ALD Automotive, 2022.
Article: Frank Jacobs & Steven Schoefs