Volvo Rents sold to Platinum Equity for €800m
By Murray Pollok10 December 2013
Volvo has agreed to sell its North American rental business Volvo Rents to the US private equity firm Platinum Equity for approximately SEK 7.2 billion (€800 million).
The transaction includes only the Volvo Rents operations in the US, Canada and Puerto Rico, which employs 2100 people and is the fifth largest rental business in North America with annual revenues of around €450 million.
Volvo Rents was established in 2001 by Volvo Construction Equipment (Volvo CE) but was split away from the construction equipment manufacturing business in April 2011 to become a stand-alone company within Volvo AB. Following that split Volvo Rents grew rapidly through acquisitions, buying more than 50 companies over a two year period.
“We looked at different alternatives to grow Volvo Rents’ business and concluded that the best alternative is to sell the operation to another owner”, said Olof Persson, Volvo Group president and CEO, “Volvo Rents’ business does not have a sufficiently strong connection with the Group’s core operation to motivate continued ownership.”
Outside North America, the Volvo Rents brand is still used by Volvo CE for its dealer-rental operations. There is a team of around 11 people, led by global rental director Bud Howard, who are tasked with establishing dealer rental activities. This business is not included in the transaction and will continue unchanged.
A requirement for completion of the acquisition is that Platinum Equity is successful in a debt offering to be made to finance its acquisition. Volvo CE will continue to sell products to Volvo Rents under the new ownership.
Platinum Equity is one of the largest private equity companies in North America and already has interests in the rental sector through its stakes in two North American businesses, Maxim Crane Works, a crane company, and NESCO, the utility equipment rental specialist.
Volvo said that all the Volvo Rents’ employees will remain with the company as it is sold. Volvo Rents’ revenues in the first nine months of this year were SEK3.1 billion (€344 million) and it posted operating losses of SEK47 million (€5.2 million) in the same period.
Volvo Rents was established as a route to the fast growing rental market for Volvo CE’s compact equipment. The strategy was to establish a franchise organisation in North America and Europe. This was successful in North America, although many of these franchises came under extreme financial pressure during the economic crisis, triggering a new strategy under which Volvo Rents bought many of the franchises as well as dozens of independent rental businesses.
In Europe the franchise model proved more difficult to establish, with most Volvo Rents operations being developed by Volvo dealers.
Volvo said in the acquisition announcement that Volvo Rents will continue to source equipment from Volvo CE, although the details of any commercial agreement have not yet been made public.