History made as Zenith drives through fifth business buyout

The company is thought to have gone through more MBOs than any other business in Yorkshire, if not Britain.

The latest deal is subject to regulatory approval but is expected to create a major player in the large but fragmented contract hire and leasing market.

The buyer, HG Capital, was so keen to acquire the company that it pre-empted a sale process with an offer for a majority stake in a deal worth more than £200m.

The transaction represents a very profitable piece of business for the seller Morgan Stanley Global Private Equity, which acquired Zenith in September 2010 in an £85m deal.

It is also thought to have led to another multi-million pound windfall for Andrew Cope, the outgoing chairman who as chief executive was the driving force behind the success of the company.

Mr Cope, who retains a significant stake in the company, told the Yorkshire Post: “It’s a good deal for everybody.”

Zenith provides company cars, commercial vehicles and employee benefits such as salary sacrifice to mid to large corporations across the UK. It has around 27,000 funded vehicles, compared to around 9,000 at the time of the first buyout in 2003.

Zenith competes against Europe’s largest banks and motor manufacturers and regularly beats them, according to the management team.

HG Capital, its owner to be, is aiming to become a leading player in the sector.

Last month the London-based private equity firm completed the acquisition of Leasedrive, a major competitor of Zenith and the UK’s largest independent privately-owned vehicle management group, and installed Jon Walden, an industry veteran, as chairman.

Mr Walden has held many senior positions in the automotive industry, including the CEO role at Lex, the largest fleet manager with 270,000 vehicles.

Lex is followed by Leaseplan with around 136,000 vehicle and BMW-owned Alphabet, which has around 122,000 vehicles. The overall market is thought to represent 3.6m vehicles.

Leasedrive, based in Berkshire, reported sales of £132m in the year ending December 2012.

A combined Leasedrive and Zenith would create a top ten player with a combined fleet of around 50,000 vehicles.

Tim Buchan, chief executive of Zenith for the last three years, will remain at the helm of the company.

He told the Yorkshire Post: “It’s business as usual at Zenith and we focus on continuing to expand our product range and developing our strategy to support our customers into Europe.”

In a statement, he thanked Morgan Stanley Global Private Equity for its contribution and said he was pleased to welcome HG Capital as the company’s new partner.

Andrew Land, a director at HG Capital, said: “We are delighted to be investing in Zenith and to be supporting its high calibre management team.

“We look forward to working closely with them to continue their growth and success.”

Speaking after the acquisition of Leasedrive, Mr Land said HG Capital sees real growth potential in the leasing sector as more organisations recognise the potential of the company car as a recruitment and reward tool in the war for talent.

Zenith has grown its sales from £40m in 2004 to £184m in 2014, its 25th year of operation. Profits have risen to £15.3m over the same period.

Jean-Marc Jabre, managing director at Morgan Stanley Global Private Equity, said: “Over the last few years, we have worked closely with the Zenith management team to grow the business, invest in its infrastructure, including its brand, the award-winning Pulse platform, and its funding strategy.”

The company agreed £91m in credit facilities with new and existing lenders in October.

Mr Jabre added: “We are proud to have played a part in Zenith’s history and wish them well on the next steps of their development with HG Capital.”

Mr Cope was among the seven founders of the business in 1989.

He led the first management buyout in 2003, which was backed by private equity firm 3i in a deal valuing the company at £18m.

Two years later, 3i sold its stake to Dunedin in a deal that valued the business at £25m.

In 2007, Dunedin sold out to Barclays Private Equity in a transaction that valued Zenith at £44m.

The Morgan Stanley buyout in September 2010 was the fourth and valued the company at £85m.