IMPERIAL Holdings, the transport and logistics group, and Wesbank, the vehicle financier, will commit R100m in seed capital to a 50-50 joint venture that seeks to boost both companies’ presence in the fleet market. In terms of the deal announced yesterday, the new venture, to be called Imperial Fleet Management and to become a Wesbank division, will offer vehicle leasing solutions to corporate fleet clients. By creating the leasing or rental option, the deal signals that fleet companies are keen on easing the pressure on their balance sheets by entering into off-balance-sheet transactions. Imperial will provide vehicles and full maintenance through its 250-dealer network, while Wesbank will bring funding as it has access to “competitive funding”. Imperial CEO Hubert Brody said yesterday the venture was expected to become profitable after a couple of years and generate more than R1bn in annual revenue. To achieve this target, Brody said, the alliance needed to build a modest book of 10000 vehicles a year, with a combined value of R1bn-R2bn. Brian Riley, the CEO of Wesbank, said the minimum of 10000 vehicles a year would turn the venture into a “serious player” and create economies of scale.

Riley said the venture would generate an acceptable return on equity of about 25% after 3-4 years. He described the deal as “win-win” and confirmed it was a 50-50 partnership. The R100m seed capital the two planned to commit would be held against lending advances, Riley said. The firms are contributing R50m each. Brody said the companies believed there was a drive by corporate fleet customers to lease or rent noncore assets such as vehicles and take them off the balance sheet, rather than buy them and put them on the balance sheet. Imperial could “not ignore” the fleet market, which accounted for 25%-35% of the total vehicle market, Brody said. The retail market, where Imperial and Wesbank already have a significant presence, represents 50%- 55% of the total market. After unbundling Eqstra in 2008, Imperial was left with no leasing offering for fleet customers. Brody said Imperial was not putting new capital into the retail business, which includes dealerships and distributorships. Imperial has said this business is cyclical and, in the future, it wants to invest in logistics, tourism and parts-and-component operations. Brody said the venture would strengthen Imperial’s retail automotive business, which brings in about R30bn in revenue a year. It would also create volume throughput — the number of cars the group sold through each dealer — as the partnership will utilise Imperial’s dealership network.