Financial services group Nedbank is on the verge of buying enX’s fleet management business, Eqstra, in a deal worth about R1bn, bolstering its fleet management capabilities three years after Bidvest failed to buy Eqstra.
Ciko Thomas, managing executive of retail and business banking, said the deal, which is subject to regulatory approvals, will enhance and complement Nedbank’s fleet management business offering and will benefit both entities’ existing and future client base.
“A combined Eqstra and NedFleet operation will provide an integrated approach to fleet management, aimed at providing better quality, cost and scale to our joint clients. The acquisition will also expand Nedbank’s product and services offering in Namibia and Eswatini, and expand Nedbank Group’s footprint into a new jurisdiction in Africa, being Botswana,” Thomas said.
Petrochemicals, equipment and logistics group enX said the deal came about because it believes keeping Eqstra under its wing might restrict the logistics company’s “growth prospects and restrict the returns that can be delivered to enX shareholders”.
The company, valued at about R1.6bn on the JSE, said in Tuesday’s announcement that as a “nonbanking entity, enX is at a disadvantage in raising funds at competitive rates, which is crucial for Eqstra to maintain sustainable competitiveness, particularly against SA banks”.
Other factors cited for the sale were that the group might struggle to secure the capital for Eqstra to grow aggressively in the market, diversify its asset base and increase its credit risk appetite.
Eqstra provides commercial and passenger vehicle leasing services, including fleet management, outsourcing solutions, maintenance and vehicle tracking solutions.
The deal, subject to regulatory and shareholder approval, will involve Nedbank buying a 50.2% stake in Eqstra at a minimum of R379m and Eqstra repurchasing all its shares held by enX also for a minimum of R379m, resulting in Nedbank and Eqstra becoming the sole shareholders.
If the subscription price stays at the minimum of R379m, then the gross proceeds of the deal, along with other costs, will be at least R890m.
According to the latest audited figures for the year to end-August, the value of Eqstra’s net assets amounted to R529m, leasing assets including 11,300 vehicles amounted to R2.6bn, its loans R511m and profit R109m.
Nedbank has so far obtained irrevocable undertakings from shareholders with a total stake of 49.93% to vote in favour of the deal.
“Immediately following the completion of the transaction, Nedbank will advance monies to Eqstra to repay amounts due by Eqstra on loan account to enX and its subsidiaries; and refinance Eqstra’s interest bearing debt in its entirety,” it said.
In addition, enX has undertaken to not compete in the same space as Eqstra for five years from the closing date of the deal.
Jacqui Carr, CEO of Eqstra, said the partnership with Nedbank promises to enhance its service offerings and accelerate the company’s growth.
“This acquisition combines our fleet management expertise and custom-designed, leading-edge enterprise systems with Nedbank’s client base, financial strength and technical resources. We are committed to a seamless transition and look forward to scaling our operations, continuing to invest in advanced technologies, and expanding our service offerings,” Carr said.
enX has been trying to sell Eqstra since October 2018, after its board decided it could do no more to enhance the operations of the company it bought in 2016.
Bidvest, the top 40 services and distribution group tried unsuccessfully three years ago to buy Eqstra, after initially agreeing to pay R3.1bn for the business in 2019.
The deal fell through in May 2020 after approval from the Prudential Authority failed to materialise before a deadline for the transaction.
Update: December 12 2023
This story has been updated with new information throughout.
khumalok@businesslive.co.za
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