German car manufacturer Volkswagen is in advanced talks to sell its stake in LeasePlan, a third-party leasing company. According to sources, the firm may be getting rid of its 50 per cent stake in a bid to cut costs and refocus its business – and the final decision is expected to be announced later this week, reports Reuters.
Based in Wolfsburg, Volkswagen owns VW Leasing GmBH. This is an in-house leasing business that increasingly relies on Volkswagen Financial Services. This makes it difficult to justify having a stake in another leasing business – LeasePlan - as well, say sources.
Recently, Volkswagen has undertaken a cost-cutting project. The firm hopes to make savings of at least €5 billion (£3.49 billion) per year by 2017 – and it wants to close the profitability gap with rivals like Toyota.
LeasePlan is based in the Netherlands and finances 1.42 million cars annually. In 2014, it reported a net profit of €372 million and sources expect it to be valued at around €3 billion. The other 50 per cent stake is owned by Metzler, a German bank that may also sell its stake in the potential deal.
Looking for a buyer
Earlier this year, Volkswagen and Metzler hired investment bank Rothschild to find a buyer for LeasePlan.
A number of consortiums have handed in bids for the business. One, which includes the Abu Dhabi Investment Authority, Singapore's Government Investment Corporation and private equity firm TDR Capital has emerged as a front-runner for a deal.
However, banking regulators in the Netherlands have baulked at the proposed deal structures. They say bidders need to demonstrate they can meet minimum requirements in terms of capital and liquidity, reports Reuters. The deal must get approval of the Dutch central bank since LeasePlan operates a Dutch banking licence.
A source told Reuters: "The sales process has now been re-started after solving the issues with the central bank."
On Wednesday (July 22nd), Volkswagen closed 1.28 per cent down to 38.85.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.