The unique deal – a blend of equity, debt, and venture capital finance – represents a major breakthrough for the ‘Easy Empire’, established by Stelios Haji-Ioannou in 1995 and which now includes an airline business (easyJet), internet caf‚s (easyEverything) and easyValue.com, an online price comparison service. Haji-Ioannou is also head of Stelmar Shipping, the tanker fleet operator he founded in 1992.
The finance package will fund expansion of the car rental business across another five European cities in addition to the 14 in which easyRentacar already operates. BoS, which also provides lease financing for the group’s vehicle fleet, has agreed to a £13m loan facility in addition to taking an equity stake in the business. Depending on the eventual Initial Public Offering (IPO) valuation, BoS and NBGI will jointly own between 17.5 and 32.7 per cent of the car rental business, with current estimates putting market capitalisation at £80m.
Structured deal aims for long-term returns
EasyRentacar is one of the first companies to secure funding via Bank of Scotland’s Integrated Finance product, in which packages of £10m-£30m are structured from a mixture of senior debt, mezzanine, loan stock and equity. With a focus on generating returns from long-term running yields rather than short to medium-term equity appreciation, BoS ? a leading bank providers of private equity ? hopes to strengthen the longer-term relationship between finance provider and corporate. ‘Integrated Finance complements the activities of private equity houses like NBGI, by providing an exit from firms that are not achieving the high yields of growth now expected by VCs’ said BoS. The bank also stresses they are ‘happy’ to concede higher equity stakes to the management, usually giving them a controlling interest in the firm.
NBGI Private Equity, the UK-based venture capital firm, has a history of investing in the car rental and automotive industry. It has a £9.5m stake in LSUK, a vehicle parts and service business, and also backed the acquisition of 41 Lex Autocentres from Lex Service plc, later rebranded as Nationwide Autocentres.
PE finance all the rage – EVCA
Private equity is becoming an increasingly popular source of finance for firms wary of digging too deep into debt. The online ventures of Haji-Ioannou’s rapidly expanding business were funded in their early stages by venture capital, and easyGroup’s chairman says he feels comfortable with this method of funding. The European Private Equity 2000 survey, sponsored by the European Venture Capital Association and PricewaterhouseCoopers, said that last year saw the largest amount of cash ever invested by private equity and venture capital firms. Funds invested totalled a record Euro 34.9bn (Pounds 21.24bn) in over 10,000 companies, an increase of 39 per cent since 1999 (Pounds 15.28bn). The UK continues to lead Europe in this area, with 37 per cent of total funds raised (Pounds 10.77bn)
EasyRentacar scored a huge success last year when it signed an exclusive deal with Daimler-Chrysler to use the German-US carmaker’s Mercedes A-Class models. Since then, it has secured the supply of another 9,000 A-class Mercedes to its existing fleet of 4,000. EasyRentacar had 120,000 customers on its books in the first 11 months of operation.
This article first appeared on bfinance.co.uk.