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THE long-awaited resolution to what the Westpac Group wanted to do with its St George Finance car loans division has been revealed with the sale of the bank’s floor plan assets to the US-owned Cerberus Capital Management via its portfolio company, Angle Finance.

Cerberus Capital Management, L.P. is a global leader in alternative investing with $US55 billion in assets under management. It has extensive experience in the financial services sector.

Under the deal, Westpac will transfer more than 100 auto dealer and loan introducer agreements covering 1200 dealerships nationally together with approximately A$1 billion of wholesale dealer loans.

Included in the deal are strategic alliance agreements with global vehicle manufacturers and Australia’s largest salary packaging firms.

Angle Finance will get access to all of the new retail loan businesses that come through from those dealers and also any new business that comes through from the novated leasing companies.

The purchase price for the deal was not disclosed but finance industry insiders said that the numbers disclosed around the deal indicate around $200 million in goodwill.

The deal does not include around $10 billion in Westpac’s retail auto loans book. It appears that Westpac could not find a buyer for this part of the business.

It has decided it will no longer take new dealer loans and novated leases, and it will also now wind down all existing loans over the terms of those loans until it exits the retail car finance arena altogether.

This move to wind down the retail loan book will leave a progressively widening gap in the car finance market which is seen as a timely business opportunity for newcomers to the sector such as Branded Financial Services, Allied Credit and Taurus Motor Finance amongst others.

The Westpac Auto Finance business was expected to have written nearly $4 billion of consumer and commercial loans in the full year 2020.

The new entity will operate as Angle Auto Finance. The company said that it expected to recruit more than 500 staff in the coming months, including more than 200 Westpac employees to work on the auto financing platform.

Commenting on the goodwill, a finance industry insider told GoAutoNews Premium: “That’s a lot of money because it’s not like they were buying a retail loan book that has lots of income in it. They are buying a floor plan, which is really low-returning, loss leader stuff. It is just the floor plan.

“So Westpac would have been really happy with that because I know that they wouldn’t have been expecting to get anything when they first got into this,” they said.

“They didn’t sell the loan book in the end. They are keeping all of that. So that’s just a goldmine for Westpac because they will just sit there and it will make truckloads of money with virtually no costs.

“They will just sit there collecting the money. Since they are winding it down, they will not need  any sales team or anything like that. The fact that they were able to keep the money, keep the back book and then get a premium; it’s just a bit of a windfall. I would say whoever organised that at Westpac would be getting the big bonus.”

The insider also said that Angle faced a real challenge in a very competitive market with a raft of new players looking to pick up the Westpac loan business.

“They are setting it up completely from scratch. They’ve got to set up all the systems, all the people have to come across from Westpac and they are going to try and keep all the dealers in bed in the meantime. It’s not easy.

“They have to get a novated leasing system working and they have to get a floor plan system and team working. They then have to transition across 100 dealer groups with their floor plans; 1200 dealerships. Half of them would have floor plans and the other half would be retail only dealers that don’t have floor plans. So it is a big job.

“They will be relying 100 per cent on the experience of the 200 from St. George by the looks; no doubt from the regional staff in Sydney, Adelaide, Brisbane, Perth, dealer-facing staff, the wholesale floor plan staff, dealer sales and business development managers from the finance company.”

Cerberus was founded in 1992 and has been an acquirer of businesses over the past several years. It now has investments in financial services, healthcare, consumer and retail, government services, manufacturing and distribution, technology and telecommunications, building products, energy and natural resources, apparel, paper, packaging and printing, transportation, commercial services, industrial and automotive, real estate, travel and leisure, and weaponry.

The firm is big in private equity investment, lending, specialty finance, real estate investment, and securities trading. Its current investment portfolio includes more than 40 companies around the world with an average hold time of more than five years.

Angle Finance chairman Bernie Campbell said in a statement that the core of the Auto Finance business would be partnerships and that it would “seek to help our partners’ businesses grow and succeed through significant investments in technology, streamlined processes and initiatives aimed at elevating customer experiences”.

“With the backing of Cerberus, we are excited to build on Auto Finance’s established platform under the Angle Auto Finance banner,” he said.

The company said that In the initial stages, Angle Auto Finance would focus on “supporting existing dealers, auto manufacturers and novated lease partners as well as winning new business through modern technology, streamlined policies, and improving auto-decisioning”.

Westpac Auto Finance managing director Michael Correa said he was pleased with the announcement and that it would provide certainty for the industry.

“Angle Auto Finance is committed to the auto finance industry and will provide the capability and strategic focus to grow and improve the business,” he said.

“I look forward to working with Angle Auto Finance to ensure a smooth transition for our important partners and customers.”

Cerberus Australia Advisors managing director David McWilliam said: “Angle Auto Finance will be able to deepen relationships with dealers and other partners by providing leading solutions supported by technology and high-quality services. We look forward to bringing Cerberus’ expertise and resources to support Angle Auto Finance in becoming the auto financer of choice in Australia.”

The transaction is expected to be completed in the fourth quarter of 2021.

By John Mellor

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