Société Générale to Float ALD Automotive on Stock Market
French finance and banking institution Société Générale has announced that it intends to float its international car leasing and fleet management company ALD Automotive on the French stock market. The stock market introduction is expected to happen during the course of this year, and would involve a limited portion of the company.
The objective of the move is to accelerate growth and enable ALD Automotive to become a substantial player in the mobility services domain. Société Générale considers ALD Automotive to be a high added-value operation, with important synergies in both commercial and financial terms, within the group. This is why the company will retain a controlling interest in its subsidiary, following the flotation. ALD Automotive manages a vehicle fleet of almost 1.4 million assets in 41 countries globally. For years, ALD Automotive has grown its activities with both local and international accounts. Furthermore, it is continuously expanding its geographic scope with an important footprint not only in Europe but also in Asia and Latin America.
The move to float ALD Automotive could be seen as an effort by Société Générale to diversify away from retail banking, as low interest rates cause a drop in revenue. In fact, the ALD Automotive announcement coincided with the report of a 40.5% drop in Société Générale's net income for the last quarter of 2016, to 390 million euro. However, that was still better than a Reuters average analysts' estimate of 354 million euro.
To combat the added toll of stricter regulations, challenges from online competitors and the continuing fragility of the economic recovery in France, Société Générale plans to cut costs in its French retail banking business, while boosting investment in online banking. On the investment banking side, it has reduced staff in France, while hiring in Romania and other low-cost countries.
Financial services to companies — which include vehicle leasing and fleet management – have been one of Société Générale's growth engines, with Q4 revenue rising 23.4% to 454 million euro. ALD's stock flotation is aimed at further bolstering that growth.
As was confirmed by Frédéric Oudéa, CEO of Société Générale, in an interview with Les Echos: “Like retail banking, mobility is undergoing a major transformation right now. Car manufacturers are also becoming service providers. This is important for ALD Automotive, which is the biggest leasing company in Europe and the third-largest in the world. If we want to move ahead, we believe in providing more flexibility, agility and visibility to ALD Automotive. That is we are doing this IPO – to give ALD Automotive the freedom to form partnerships or acquire startups to grow new services. We want ALD to be a pioneer, but we will also maintain control over what is a very promising part of our group.”
According to Oudéa, ALD Automotive will aim to enhance its range of innovative services to be ready for the mobility of the future: “Some estimate that by 2025, a quarter of all vehicles will be driverless. ALD Automotive could position itself to manage these fleets. Such strategies could even be extended to other parts of the Société Générale group.”
Editor's note: Tim Harrup is a contributor to Fleet Europe.