TPG Capital loses appetite for Westpac sale of $ 2 billion in auto loans
Private equity firm TPG Capital is believed to be rethinking its competitive position to buy the auto lending business of Westpac, which is now expected to have Liberty Financial as its individual bidder.
Liberty Financial and TPG had formed a consortium to buy the loans, going after shortlisted competitors such as Kohlberg Kravis Roberts, Cerberus and Angle Finance.
Allied Credit is also gearing up for the final stages of the competition, but some also question whether its private equity offering partner Bain Capital remains a motivated buyer.
Most market participants believe TPG and perhaps Bain are now unlikely after the sale process took a different path, with Westpac choosing to keep almost all existing loans so that buyers largely have the right. to generate new business.
The size of the proposed loan portfolio has shrunk to around $ 2 billion from $ 11 billion, with floor plan financing only available to a new owner.
Market sources estimate that the valuation of goodwill for the auto loan transaction is between $ 450 million and $ 700 million.
TPG would undoubtedly have provided firepower for a broader Liberty Financial offering earlier.
However, the two groups have a 20-year relationship and some say it remains on hold if there is a need for capital by Liberty.
The offers are expected in the middle of next month in a competition spearheaded by Morgan Stanley, now believed to be led by credit operators rather than private equity powerhouses.
With respect to Pepper Money, which is for an initial public offering, it is understood that it would service the loans if they were acquired by its private equity owner, but would not put any funding in. the company.
It is understood that potential suitors will need to find a new management team to manage the auto loan division and install a new computer system for the operation, which generates around $ 5 billion in loans per year.
Westpac has been prepared to offer synthetic loans to interested buyers, sources said.
The Australian bank has sought to stage an exit from the auto lending business after stricter rules on interest rates charged on auto loans and other stringent measures were introduced by the regulator.
Westpac sold its non-core assets as part of a move to streamline its business.
Last year, more than $ 4 billion in non-core heritage assets were placed in an operations division into a dedicated unit, overseen by Jason Yetton.
Morgan Stanley is also working on the sale of Westpac’s wealth management division.
It has been suggested that industry tech players such as Avalon and FNZ take a look, though questions remain as to how these parties are funding what would constitute a major acquisition.
This sale process for what includes Westpac’s BT Panorama wealth management operation is not expected to begin for a number of months.
So far, valuation estimates are between $ 700 million and $ 1 billion for a company said to have a market share of around 19%.
Westpac has already sold its Pacific Bank to Kina Securities for $ 420 million, and its general insurance business was transferred late last year to Allianz for $ 725 million.
Last year, it also transferred its supplier finance business to Cerberus Capital Management.
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