Interview: Winner takes all

The completion of the Lavendon acquisition – closely followed by that of Hune in Spain – is a key moment in the evolution of Loxam and in the career of its long time CEO, Gérard Déprez.

It is no surprise that Mr Déprez, speaking to IRN by phone just days after the confirmation of the deal, gives every indication of being extremely satisfied with the transaction.

“We can consider it a good deal”, he says, “because when you think of Lavendon Group as a stand-alone company, it is very big in the market, particularly in the UK and Middle East, so maybe the price is right?

“If you consider Lavendon inside Loxam, it changes the profile of our company, because for us the Middle East only represented five people, but now it will represent between 35 and 40 people, so the perspective is completely different now.”

His take on the bidding battle with TVH is straightforward, claiming that TVH’s initial offer undervalued Lavendon and that acceptance of that initial offer would have been a surprise. Mr Déprez says he expected the price to increase on a number of occasions, and that TVH Group was simply testing the water with its first bid.

Loxam’s CEO says he is proud to have finally landed a company that has been in its sights for some time; “We see Lavendon Group as a great fit for Loxam. We knew it would be a great addition to our company but we needed to find the right time to do the deal. However, because of TVH Group’s bid, we were forced to enter negotiations. We knew we had to act fast, or risk losing out, as we knew how much TVH Group wanted the company.”

The attractions of the deal are obvious to any observer of Europe’s rental market, but what is Mr Déprez’ own take on the benefits?

He says the size of the company was the biggest draw, adding that it was important for Loxam to balance out its geographical operations. The deal will reduce Loxam’s reliance on France, where previously around 80% of revenues were generated. That proportion will now be nearer to 60%.

An interesting part of any major acquisition is how the companies will manage the merger.  Mr Déprez says does not wish to change anything and added that the expertise of Lavendon Group, and its people, would be invaluable to Loxam.

“We are proud to buy a company that is performing well and clearly they have done a good job in the last year. They have increased their position in the UK, they are profitable, and are growing in the Middle East.

“So from my point of view, I don’t want to change anything in terms of management as it is working. We will have a lot of work to do inside Loxam to integrate everything, but I will be very comfortable and very happy if the management team stays and continues to work in the same way.”

He adds that the senior management are experts in their main field – access equipment – and says Loxam will learn a lot from them.  “It is always the same for Loxam – we keep the people, all the people.”

 Mr Déprez also says that, in general, the branding of Lavendon’s operations would not change, unless Loxam comes up with a way of co-branding the equipment in order to make its own name stronger. Lavendon’s five brands include Lavendon in France, Nationwide Platforms in the UK, Rapid Access in the Middle East, Gardemann in Germany, and DK Rental in Belgium.

Despite that, it looks like there will be some changes in the UK, where Lavendon has a much stronger presence than Loxam. “One change we will make is that Loxam will merge with Nationwide in the UK, and the Lavendon staff will manage the depots. This is because it is the bigger company locally.”

He says the UK is the only market where there may be some duplication of depot locations; “In the Middle East there is no overlap, and in Germany and Belgium we are only in rental for general plant, so there is no need to make changes there.

“As for France, we have decided that we will keep the two depots working alongside each other, but we need to see how that goes. We may change this eventually, but we need more time to decide what will happen there. But, at this moment, I am comfortable and happy to let the two depots [networks] run independently.”

In regard to the two company’s dominant equipment suppliers, he says is he unaware at this stage which suppliers Lavendon used, but added that both companies have Genie and JLG, while Loxam also has Haulotte, given its strong presence in France. He did however say that, once again, he wished to not change anything.

As previously mentioned, the company has also recently completed the acquisition of Spanish rental company Hune, for an undisclosed price. The two had been in negotiations since November, although that deal rather entered the shadows once the Loxam-TVH battle for Lavendon started.

Clearly a much smaller acquisition than Lavendon, it is still very significant, giving Loxam the second largest rental company in Spain (after GAM), with revenues of around €67 million last year and 35 branches  in Spain as well as eight other locations in Portugal and at joint ventures in Saudi Arabia and Colombia.

Again, Loxam will not have been the only company to have bid for Hune: IRN understand that there were two other serious contenders. The fact that it sealed the deal shows the depth of Loxam’s pockets and the scale of its ambitions. With Hune and Lavendon,  Mr Déprez says Loxam’s annual EDITDA is expected to be around €450 million for 2016.

As far as any more acquisitions go, Loxam’s CEO said the company wasn’t planning any in the short to medium term, joking “full stop”.

With the complexities of an acquisition of this size, and the challenges of integration, which will be an on-going process, it remains to be seen whether the €535.55 million deal to acquire Lavendon will prove to be a bargain for Loxam.

Bargain or not, there is no doubt  it reinforces Loxam’s dominant position as Europe’s largest rental business and gives it a seemingly unassailable leadership position in access equipment, which is one of the most important product categories in rental. Mr Déprez has every reason to be pleased.

By the numbers

France-based Loxam is the largest equipment rental company in Europe, with €838 million of revenues  in 2015. The addition of Lavendon – with sales of around €310 million in 2016 - will boost Loxam’s revenues to around €1.3 billion, strengthen its operations in key European markets such as the UK and Germany, and give it a meaningful presence in the Middle East for the first time.

It also gives Loxam a dominant position in Europe’s powered access market, with Lavendon’s 22000 unit fleet taking its total aerials holding up to around 43350 units (a figure that includes the 5000 machines also added by the Hune acquisition in Spain).

That total fleet is more than three times the size of the two next largest, which are operated by Cramo and Riwal. Loxam’s access market share in Europe will now be approaching 17%, based on IPAF’s estimated market size.

In terms of its footprint on the ground, the acquisition adds around 70 depots, located in the UK, Continental Europe (France, Germany, Belgium) and the Middle East (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE).

These will expand Loxam’s existing network of 641 branches in 11 countries in Europe (France, Germany, the United Kingdom, Ireland, Belgium, Switzerland, Spain, Luxemburg, the Netherlands, Denmark and Norway), as well as in Morocco and Brazil.

Lavendon’s fleet at the end of 2015 was split as follows: UK (Nationwide Platforms) 10350 units, Middle East (Rapid) 3650, Germany (Gardemann) 3500, France (Lavendon France) 2300, Belgium (dk rental) 1200.

Loxam vs TVH

22 Nov, 2016: TVH bids 205 pence per share, equivalent to a value of €406.12 million.   Rejected by Lavendon, citing lack of shareholder support.

28 Nov: Loxam approaches Lavendon regarding a possible cash offer.

14 Dec: Loxam and Lavendon recommend a deal at 220 pence per share.

15 Dec: TVH Group increases its offer to 230 pence.

16 Dec: Loxam counter-offers 250 pence per share.

24 Dec: TVH Group responds with 251 pence per share.

28 Dec: Board of Lavendon recommends increased offer from Loxam of 260 pence per share.

3 Jan, 2017: TVH Group makes new offer of 261 pence per share.

18 Jan: Loxam delivers knock-out blow with bid of 270 pence per share.

27 Jan: TVH drops out of the chase.

15 Feb:  Loxam’s proposal declared unconditional by the boards of both companies. The price values Lavendon at €535.66 million.