SocGen’s ALD Buys LeasePlan for $5.5 Billion in Cash, Stock

(Bloomberg) -- Societe Generale SA’s car-leasing arm ALD SA agreed to buy competitor LeasePlan from a consortium led by TDR Capital in a deal valued at 4.9 billion euros ($5.5 billion).

LeasePlan’s shareholders will receive 2 billion euros in cash as well as shares representing 30.75% of the combined group, according to a statement Thursday. ALD will finance the deal in part through a 1.3-billion-euro rights issue underwritten by Societe Generale.

The merger is set to create a global player in mobility, with a total combined fleet of about 3.5 million vehicles. French banks are racing to get a share of the fast-growing European leasing market, where higher profitability stands to help lenders repair returns dragged down by a decade of low interest rates and higher capital requirements.  

SocGen shares gained as much as 1.35% in early Paris trading, while ALD’s jumped 7.59%.

The “combined entity will aim to become, in the medium term, a third pillar alongside, on one hand, the retail banking and insurance, and on the other hand, corporate and investment banking businesses,” SocGen Chief Executive Officer Frederic Oudea said in the statement.

Societe Generale is set to remain the long-term majority shareholder of the combined entity, with a stake of roughly 53% at closing.

What Bloomberg Intelligence Says

ALD Automotive’s plan to purchase 100% of LeasePlan is not a surprise and makes sound sense and will significantly boost Societe Generale’s 80%-owned operational leasing and fleet management arm. Playing to two key automotive themes -- electric vehicles and leasing over ownership -- it’s potentially 5% accretive to SocGen EPS by 2024, and also further confirms plans to redeploy CET1 to drive growth.

-- Jonathan Tyce, senior industry analyst

The fleet size compares to an objective of 2 million vehicles by 2025 for BNP Paribas SA’s dedicated unit Arval, and a target of 1 million vehicles by 2026 for Credit Agricole SA, which recently announced the creation of a car leasing joint-venture with automaker Stellantis NV. 

The deal is SocGen’s biggest leap in auto leasing since it began expanding into the market in the early 2000s. The bank, which expanded ALD in part through acquisitions, took the business public in 2017. 

The deal is not expected to affect SocGen’s distribution policy, as the lender confirms its 50%-shareholder payout ratio. The bank foresees a 40-basis-point impact on its CET1 ratio, a key measure of its financial strength.

SocGen aims to reach 380 million euros in annual pre-tax cost synergies by 2025, by which the new entity intends to attain a 45%-cost-to-income ratio, instead of the 46% to 48% that ALD had in sight on its own.

The proposed transaction, which is pending regulatory approval, is expected to be completed by the end of 2022.

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