Societe Generale announces the signing by Societe Generale and ALD of two Memorandums of Understanding under which ALD would acquire 100% of LeasePlan from a consortium led by TDR Capital, to create a leading global player in mobility with a total combined fleet of around 3.5 million vehicles(1):
- The proposed acquisition of LeasePlan for a total consideration of EUR 4.9bn(2) would be made through a combination of shares and cash;
- Societe Generale would commit to remain the long-term majority shareholder of the combined entity (“NewALD”) with a ~53% stake at closing, LeasePlan shareholders holding 30.75%.
This transformative project would be a step-change towards creating a leading global player in mobility, benefiting from highly compelling complementary capabilities and synergies. Benefitting from materially increased investment firepower and differentiated know-how, the combined entity will be particularly well-positioned to take full advantage of the industry’s underlying basic trends, including the shift from vehicle ownership to usership and to electric vehicle fleets, as well as the growth of digital technologies to enrich services provided. This project would be perfectly coherent with the corporate purpose of the Societe Generale group and its ambition notably to actively support economies as well as our customers in their energy transition.
This foreseen acquisition would be highly value-creating for shareholders, with net earnings per share accretion of ~+20%(3) for NewALD in 2023, as well as >+5%(4) for Societe Generale from 2024. Societe Generale would benefit from a ~80bps(5) ROTE uplift in 2024. At Group level, the capital impact at closing is expected to be around -40bps(6).
This intended transaction is perfectly aligned with the Group’s strategy to preserve its disciplined and balanced capital allocation policy, combining the financing of growth of its businesses, in priority its most profitable businesses, with an attractive dividend policy based upon a 50% pay-out-ratio of the Group’s underlying net income(7).
Frédéric Oudéa, Chief Executive Officer of Societe Generale, comments:
“This proposed transaction is a major step for ALD and for the Societe Generale group. Over the past 10 years, thanks to long-term vision and rigorous execution, we have positioned ALD to take advantage of the tremendous growth potential in the sustainable mobility market. In line with Societe Generale group’s corporate purpose and notably to actively support economies as well as our customers in their energy transition, 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, reinforcing the balance of the Group’s business model. More generally, this proposed acquisition is fully in line with the Group’s strategy to deliver profitable and sustainable growth and strong value creation for its shareholders.”
Two industry leaders join forces at the forefront of the industry transformation
ALD is a global leader in mobility solutions providing full-service leasing and fleet management services across 43 countries with a total fleet of 1.7 million vehicles. It has a proven track record in fleet growth (+4% fleet CAGR(1) ), profitability (~16% of ROE(1)) and efficiency (48% cost-to-income in 9M 21).
LeasePlan is a leading fleet management and mobility company worldwide with a total fleet of 1.8 million vehicles(2) and an extensive offer making it the perfect fit for ALD to shape the industry’s transformation.
The proposed combination of the two companies would create a leading global player in mobility with a total fleet of 3.5 million vehicles(2). This transaction would provide key advantages: a global offer and coverage of all client categories, an increased breadth in terms of products and services, and a large and balanced geographic coverage. These would enable NewALD to anticipate future market needs and meet client expectations with industry-leading operating efficiency and optimised procurement.
Ideally positioned in a fast-growing market supported by strong underlying megatrends, NewALD would have a unique opportunity to:
- Lead the data-driven digital transformation of the sector
- Drive the shift towards usership on all fronts: B2B, B2C and even B2E(3)
- Accelerate the transition towards low-emissions and sustainable mobility
The enhanced firepower to invest and develop new mobility products and ancillary services would allow NewALD to build new digital business models based on core value chain competencies and state-of-the-art digital solutions across client categories, products, and services.
By establishing new global partnerships around new services for Electric Vehicles, NewALD would accelerate the deployment of multi-cycle, flexible and multi-modality solutions, ensure faster time-to-market for innovative sustainable mobility solutions and lead the fair transition towards Electric Vehicles for both corporates and individuals.
Powered by an enlarged offering, value-added complementarities, and with an ability to embrace megatrends, NewALD would be well-placed to capture new growth opportunities across all client categories and lift annual fleet growth to at least 6% post-integration.
Strong value creation for ALD
NewALD would target an improved cost-to-income ratio of ~45%(4) in 2025 (versus 46-48% cost-to-income target as described in Move 2025 on a stand-alone basis) thanks to a combination of scale effects and cost synergies. Operational and procurement synergies are estimated to reach an annual pre-tax run rate level of about EUR 380m. These strong cost synergies are expected to be fully achieved in 2025. Restructuring costs, estimated at ~1.25 times the annual run-rate synergies before tax, are expected to be incurred in 2023 and 2024.
In 2023, with the benefit of these foreseen fully phased synergies and excluding restructuring charges, the accretion of NewALD normalised earnings per share should be around 20%(1).
NewALD aims to have a robust capital position. As a regulated institution in the future, NewALD would target a ~13% CET1 ratio and a Total Capital ratio of 15-16%.
Strong solvency and profitability at closing would secure funding for future growth while maintaining a 50%-60% pay-out ratio.
An accretive and transformative transaction for Societe Generale
This highly accretive proposed transaction for ALD would generate value for Societe Generale. It is perfectly in line with Societe Generale’s strategy to selectively allocate more capital to the most profitable and growing businesses and position as a leader in sustainable mobility.
The expected impact on CET1 ratio at closing would be around -40 bps(2). The Group remains committed to managing its CET1 ratio with a buffer above 200 bps over MDA at any point in time and confirms its distribution policy of 50% of underlying Group net income(3).
As a result, this proposed combination is expected to be highly accretive for Societe Generale with an improved earnings per share expected at >+5%(4) from 2024. The ROTE should increase by ~ +80bps(5) and the Return on Investment should reach >16% in 2024(6).
Key transaction terms
ALD would acquire 100% of LeasePlan through a combination of shares and cash for a total consideration of EUR 4.9bn(7). LeasePlan’s shareholders would receive shares representing a pro forma stake of 30.75%(8) in ALD’s share capital at closing and EUR 2.0bn in cash (financed by ALD through a ~EUR 1.3bn rights issue and the use of around ~EUR 0.7bn of surplus capital). LeasePlan’s shareholders would commit to a 12-month lock-up post closing, followed by a 24-month period with orderly sale provision.
Societe Generale intends to remain the long-term majority shareholder of ALD (it would commit to a 40-month lock-up post closing). Societe Generale would underwrite the ~EUR 1.3bn rights issue and retain a ~53%(1) stake in ALD’s share capital at closing.
LeasePlan shareholders would also receive warrants that should increase their pro forma stake up to 32.9% in case of exercise (EUR 2.0 strike price per share, 1 ALD share for 1 warrant, exercisable 1 to 3 years after closing, if ALD’s share price(2) increases by at least 30%).
As part of the proposed acquisition of LeasePlan, ALD would apply for regulated status (Financial Holding Company), which will allow Societe Generale to recognize minority interests in NewALD from a regulatory perspective.
Societe Generale and LeasePlan are foreseeing the execution of a shareholding agreement.
The proposed transaction has received the support of Societe Generale’s, ALD’s and LeasePlan’s Boards of Directors, as well as LeasePlan’s Supervisory Board, and is subject to information and consultation of relevant works councils. The closing of the transaction is subject to customary closing conditions. The main closing conditions are (i) the regulatory and antitrust approvals, (ii) the waiver by the AMF to the obligation to file a tender offer on ALD granted to LeasePlan’s shareholders, (iii) the shareholders meeting of ALD, (iv) the distribution by LeasePlan of its excess capital and (v) the delivery by each of ALD and LeasePlan of a pre-agreed Net Asset Value at closing allowing the combined entity to reach a CET1 level of c. 13%. The proposed transaction is expected to close by the end of 2022.
