PARIS (Reuters) - Societe Generale (PA:SOGN)'s car leasing division ALD has agreed to buy Dutch rival LeasePlan for 4.9 billion euros ($5.5 billion) to give it more scale as the auto rental market goes electric, the French bank said on Thursday.
The new company would manage the biggest electric vehicle (EV) fleet in Europe and have a market capitalisation of about 5 billion euros, SocGen and ALD said, adding that they expected to close the deal by the end of the year.
It comes four-and-a-half years after SocGen floated ALD and is in the midst of a broader overhaul of the French bank led by Chief Executive Frederic Oudea that aims to boost profitability and stabilise revenues after hefty trading losses.
Shares in ALD jumped as much as 10% to a high of 14.50 euros, the first time they have traded above their flotation price of 14.30 since October 2018, and were up 8.5% by 1300 GMT. Shares in SocGen were 2% higher.
"The combination of ALD and LeasePlan makes strategic sense in our view and will grow SocGen's mix towards a business with good and recurring revenue growth and a high profitability," wrote brokerage Jefferies, which kept a 'buy' rating on SocGen.
SocGen will hold a 53% stake in the new entity which is expected to boost the French bank's net earnings per share by more than 5% from 2024.
European banks, including BNP Paribas (PA:BNPP), Credit Agricole (PA:CAGR) and Santander (MC:SAN), have shown growing interest in auto leasing as more consumers, as well as companies, switch from car ownership to leasing.
STRATEGY OVERHAUL
The new company will be based in France and have a fleet of about 3.5 million vehicles. LeasePlan, one of Europe's largest car leasing firms, currently rents about 1.8 million vehicles in more than 29 countries while ALD manages some 1.7 million.
Oudea launched his strategic overhaul in 2018, a decade after taking the reins. He initially came under fire from investors due to the bank's poor performance and hopes the revamp will shore up his legacy before his term expires in 2023.
SocGen's share price is still well below where it was when Oudea took over in 2008 but it has rallied about 90% over the past year as it rebounded from trading losses at the start of the coronavirus pandemic
"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," Oudea said.
SocGen said the LeasePlan takeover would boost net earnings per share for the new company by more than 20% in 2023.
ALD's priority will be the integration of LeasePlan but it could do other acquisitions later, targeting start-ups or the Asian market, probably from 2025.
LeasePlan has been held since 2016 by a group of investors including TDR Capital that bought the Amsterdam-based company from German carmaker Volkswagen (DE:VOWG_p).
($1 = 0.8846 euros)