Price is likely to be the
sticking point in sale by government-owned bank. Liz Bury
reports.
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Lombard has opened the door to
buyers for its contract hire business Lombard Vehicle Management
which it designated as non-core last June.
The sale is thought to reflect the
strategy of Lombard’s parent bank RBS to shrink its balance sheet
and to reduce the need to obtain funding.
Lombard’s choice of timing means
that it will likely realise a better price for the disposal than in
would have done at the height of the recession in 2008, since
residual car values have now stabilised and business growth
returned, albeit patchy. LVM returned to profitability with
after-tax profit of £15.6m in 2009, compared to an after-tax loss
of £17m in 2008.
Julian Humphreys, former MD of
Private Label Leasing, who recently joined consultancy Invigors to
help in developing its fleet expertise, said: “When the global
crisis hit two to three years ago, new and used car residual values
took a hit.
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By GlobalData“Now they have bounced back, so
they might be able to sell LVM for a sensible price which was not
possible back then.”
To make a purchase attractive,
potential buyers would need to identify an element of strategic
value to the deal beyond simply acquiring more car leasing.
Humphreys said: “It could be a
mid-size player not having the economies of scale they desire, or
it could offer the buyer an IT platform. Alternatively it could be
a springboard for a new company to enter the market.”
Potential buyers include global
contract hire giants Arval, GE Capital, ING Lease, and Leaseplan,
and financial institutions with a good cash position. Middle east
investors could also come forward if they are looking for a
profitable investment over the long term.
LVM increased its number of small
fleets on contract hire by 23% in the year to 30 September 2010. It
currently manages 100,000 cars and vans, with clients including AA,
which it has serviced for 15 years, and British Gas, BSkyB and
IKEA.
Margin Squared director Professor
Colin Tourick said: “There will be buyers, there is no question
about that. Over the long term, LVM is a profitable, nice, big,
juicy player.”
“The idea of picking up the third-largest contract hire company
in the UK would be appealing to a lot of the existing operators in
the market. There is still a view that bigger is better in car
leasing: the bigger the company the more economies of scale.”
See also: Lombard: ‘We want to lend’
