The battle for FleetPartners has gone from an approach, to a bidding contest, to something resembling a fleet industry heavyweight bout.
And we’re only in round three.
ORIX Corporation has become the latest company to enter the process, lodging an indicative, non-binding and conditional cash offer of $3.80 per FleetPartners share.
Its arrival follows Element Fleet Management’s $3.80 proposal and comes as SG Fleet has increased its original $3.60 offer to $4.00 per share.
FleetPartners now has three potential buyers on the table. The bigger question is no longer whether anyone wants the business.
It is who should own it — and how much are they prepared to pay?
SG Fleet finds another $0.40
SG Fleet started the action with its $3.60 proposal, which FleetPartners rejected because the Board determined that it “undervalues the Company and is not in the best interests of FleetPartners shareholders”.
A week later, SG Fleet has found another 40 cents per share. Its revised $4.00 offer does not require exclusivity, although SG Fleet wants all bidders treated consistently and fairly through due diligence and the transaction process.
At face value, that puts SG Fleet level with the enhanced $4.00 price Element was prepared to offer if FleetPartners granted it three weeks of exclusivity.
FleetPartners has now rejected Element’s exclusivity request after considering the proposal and feedback from shareholders.
So the auction remains open.
But how big is too big?
For fleet customers, the SG Fleet proposal also raises a question that goes beyond the price paid to shareholders. What would the competitive landscape look like afterwards?
SG Fleet is already estimated to have around 240,000 vehicles under management across Australia and New Zealand. FleetPartners says it manages more than 80,000.
Put the two together and the resulting operation could manage more than 320,000 vehicles across ANZ.
Scale is precisely why the deal makes commercial sense. More vehicles can provide greater purchasing power and allow technology, administration and other fixed operating costs to be spread across a much larger customer base.
But that same scale could attract scrutiny. SG Fleet’s proposal remains subject to regulatory approvals, including from the ACCC and FIRB.
The industry will therefore be watching not just how much SG Fleet is willing to pay, but whether regulators are comfortable with the market position that would result.
Element brings a different proposition
Element’s argument is different. Rather than a private equity-backed regional consolidation play, Element is itself a global fleet management company.
It describes itself as the world’s largest publicly traded pure-play automotive fleet manager, managing more than 1.5 million vehicles globally.
Its wholly owned subsidiary Custom Fleet has operated in Australia and New Zealand since 1978.
Element Chief Executive Officer Laura Dottori-Attanasio described FleetPartners as “a rare opportunity to add meaningful capability in a market we know exceptionally well”.
“We have operated in Australia and New Zealand for decades and have deep knowledge of the market, its clients, and operating environment,” she said.
Element also addressed one of the obvious questions surrounding a transaction this size — funding.
It said its proposal is supported by “significant financial capacity”, while Dottori-Attanasio said the acquisition was expected to be financially accretive and “would preserve the strength and flexibility of Element’s balance sheet”.
Based on the material released so far, Element has not indicated that its offer depends on raising new capital before it can proceed.
That does not remove all transaction conditions, but it does make funding capacity an interesting point of comparison as the bidding develops.
Private equity versus pure-play fleet management
SG Fleet has the support of majority owner Pacific Equity Partners. There is nothing unusual about private equity seeking scale, efficiencies and investment returns. That is the business model.
But it does create an interesting philosophical contrast in this contest. How passionate does a private equity owner need to be about fleet management?
Perhaps not very. It needs to be passionate about returns.
Element, by comparison, is a fleet management pure play. Fleet management isn’t one investment within a broader portfolio — it is the business.
That doesn’t automatically make Element the better owner for customers. A global fleet manager still needs growth, margins and shareholder returns.
But the motivations and investment horizons are different enough to make the comparison relevant.
And now there’s ORIX
The latest entrant adds another dimension. ORIX has offered $3.80 per share and proposes to acquire FleetPartners through a Scheme of Arrangement, although it has reserved the right to pursue another acquisition structure.
Its offer remains conditional on due diligence, definitive transaction documents, required approvals and a unanimous recommendation from the FleetPartners Board, subject to the usual qualifications.
ORIX brings its own fleet management and Asia-Pacific experience, making this more than a contest between an incumbent regional heavyweight and a North American global player.
There are now three serious names around the table.
Who wants it most?
FleetPartners hasn’t chosen a winner. Its Board is considering the Element proposal, the revised SG Fleet proposal and the ORIX proposal, and has reminded shareholders that none is yet binding.
That leaves plenty of unanswered questions. Does SG Fleet go higher to protect its dominant ANZ position? Does Element use its global financial capacity to raise the stakes? Does ORIX improve its opening $3.80 proposal now that it can see where the bar has been set?
And perhaps most importantly for fleet buyers: when the financial advisers have finished calculating synergies and shareholders have counted their premium, what does the resulting market look like for customers?
Three bidders. Three different ownership models. One FleetPartners. The popcorn may need a refill.
