Editor's choice
8 Nov 18

McMillan Shakespeare and Eclipx to merge

Exciting news reached the Australian fleet community today. McMillan Shakespeare (MMS) and Eclipx have announced to merge, effective Q1 2019. Eclipx currently has a market value of $735m and was recently approached by another rival, SG Fleet, which made a scrip offer for the company that at the time valued the business at $805m. The SG Fleet bid was declined by the Eclipx board, which described the offer as opportunistic.

Market Leader

Both companies are leading players in the salary packaging (MMS) and operating lease businesses (Eclipx), active in Australia, New Zealand and the United Kingdom. The merger should effectively push the company to the top of the novated lease and fleet management ranking in ANZ. The current situation in both areas is as follows (all figures as published by MMS group):

Novated Lease

  1. Smart Group: 64,000 units
  2. MMS: 63,300 units
  3. SG Fleet: 47,265 units
  4. LeasePlan: 16,000 units
  5. Eclipx: 13,059 units

Combined MMS and Eclipx volumes: 76,359 units

Operating Lease 

  1. Eclipx: 104,001 units
  2. Toyota Fleet Management: 101,000 units
  3. Custom Fleet: 100,000 units
  4. LeasePlan: 100,000 units
  5. SG Fleet: 87,515 units (this number would exclude the Government deal that SG has recently closed)
  6. Orix: 40,000 units
  7. Fleet Care: 30,000 units
  8. Smart Group: 22,000 units
  9. MMS: 21,750 units

Combined MMS and Eclipx volumes: 125,751 units

Rationale of the merger

Both companies believe that the compatibility of their businesses will generate more potential, both in products and service offering and in geographical coverage. The new business will also have a stronger balance sheet position, as liquidity and access to capital will increase. The synergies will generate, according to the MMS announcement of the merger (and therefore, conditionally) AU$ 50 million in annual additional EBIDTA within 3 years.

From a product and services point of view, MMS offers Asset Management, Group Remuneration and Retail Finance services, generating AU$ 93 million profit (UNPATA or unadjusted net profit after tax and amortisation). Eclipx has a diversified portfolio of commercial and consumer finance, but also the retail and auction site GraysOnline and Right2Drive, a company that provides for relief vehicles after accidents, generating AU$ 78 million (NPATA).

Practical

The 2 boards will merge into one board (3 Eclipx directors will join the MMS board), Mike Salisbury and Mark Blackburn will remain respectively CEO and CFO of the group. The new company will consolidate their IT platforms, although the GraysOnline platform will be used by the 2 companies to drive end of lease returns.

A major shake-up

This is what Sydney-based Shane Curran, APAC Director at Connector, says about the merger: "If this is not a match made in heaven, it’s certainly made somewhere close by. Both businesses have a strong reputation and broad representation in the Australian fleet and leasing market, but their strengths are almost perfectly complementary. Eclipx is not especially well placed in the salary packaging and novated lease fields. At McMillan Shakespeare, it’s almost the opposite. The MMSG business is dominated by RemServ and Maxxia, two of the largest salary packaging businesses in Australia. There’s some overall vertical synergies too. Eclipx holds the GraysOnline business which supports their remarketing, while MMSG has a wide range of general finance, insurance and warranty businesses across Australia and the UK. It will be a big shake-up and will see the combined group as the largest FMO as well as being the largest novated and salary packaging provider in Australia."

Shane continues: "The difficult thing for the business now will be effectively integrating the two businesses and ensuring that they extract the best from both sides. There is an enormous amount of talent and experience in the combined business and they’ll want to make sure that they retain that."

On our question whether the merger will have effect on the development of mobility in Australia, Shane comments: "I don’t see at this stage any real mobility capability emerging in the Australian market although the effort is being made. Eclipx/MMSG are no different in this regard. I’d place the Australian market generally about 3-5 years behind Europe in terms of mobility."

Authored by: Yves Helven