Marshall Motor Holdings has sold its leasing division, Marshall Leasing, for £42.5m to Bank of Ireland.
On completion of the deal Marshall Leasing will become part of Northridge Finance, BOIUK’s car and asset finance business. The acquisition of Marshall Leasing is conditional upon Northridge Finance receiving regulatory approval.
Analyst Mike Allen of Zeus Capital said: "We see this as a positive for MMH, allowing the group to strengthen the balance sheet, focus the business model and reduce exposure to used car residual values at a time of uncertainty. The disposal is expected to be dilutive to underlying earnings per share in the year ending 31 December 2017 although there will be a significant gain on disposal.
"Continued consolidation in the leasing and fleet management sector is making scale an increasingly important factor, in a very capital intensive business model. The disposal of the leasing business allows MMH to reduce leverage allowing greater flexibility in the balance sheet and allows the group to focus its business model and financial resources on delivering further growth in the core retail business.
"While the leasing business is asset backed, the significant debt associated with the business increased balance sheet risk, in our view and we believe the business will be in a significantly improved financial position post completion of the deal."
The funds will be used to reduce Marshall's net debt (£101m at the end of June) and settle a £1m pension liability.
Marshall Leasing, which sits at number 26 in the FN50 with a fleet of more than 6,000 vehicles, provides a range of contract hire fleet services including fleet management, risk management, contract purchase and daily rental, aimed at the SME sector.
Daksh Gupta, Marshall's chief executive, said: “Marshall Leasing has been an important part of our group for many years. On behalf of the board I would like to thank all my leasing colleagues for their significant support and contribution over this period and wish them well for the exciting times ahead under new ownership. We have formed an excellent relationship with the Bank of Ireland team and look forward to working together in the future.”
Des Crowley, chief executive of Bank of Ireland UK, said that the proposed acquisition would help Northridge Finance “to continue to develop and diversify its business”.
James McGee, managing director, Northridge Finance, added: “Marshall Leasing has an excellent reputation in the vehicle hire market, has a strong order book, and is well positioned to achieve further growth. We are looking forward to working with the Marshall Leasing management team in expanding the business and also to develop a strong trading relationship with Marshall Motor Holdings.”