Zenith going for growth with deal on finance

Fleet manager Zenith has completed a major refinancing to help it gear up for more organic growth and potential acquisitions.
Tim Buchan, CEO of ZenithTim Buchan, CEO of Zenith
Tim Buchan, CEO of Zenith

The vehicle outsourcing specialist has agreed £91m in credit facilities with new and existing lenders, according to banking sources.

Mark Phillips, chief financial officer, said the Leeds-based business has “significantly deleveraged” since the 2010 buyout, which was backed by the private equity arm of US investment banking giant Morgan Stanley.

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He added: “We therefore had the opportunity to improve the efficiency of our capital structure.

“We took advantage of an attractive financing environment to raise additional financing and position our company for continued growth and expansion.”

In simple terms, Zenith replaced more expensive debt with cheaper debt, said one of the advisors.

The transaction expands the company’s panel of lending partners, bringing Lloyds and Intermediate Capital Group alongside long-term funders RBS and HSBC.

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Jean-Marc Jabre, executive director at Morgan Stanley Global Private Equity, said: “Zenith has been on a roll, winning new customers and earning the industry’s recognition through a number of awards this year.

“We’re very proud of what the business has achieved and supportive of its vision for continued growth and success.”

Led by chief executive Tim Buchan, Zenith provides company cars, commercial vehicles and employee benefits such as salary sacrifice to mid to large corporations across the UK.

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

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Andrew Cope, chairman of Zenith, told the Yorkshire Post that the deal is an important milestone in the development of the company.

He said: “It will allow us to grow strongly with the confidence and support provided by our banking partners.”

Zenith is the UK’s largest independent leasing, fleet management and vehicle outsourcing business and manages a fleet of more than 40,000 vehicles.

It is one of Yorkshire’s most visible private equity success stories.

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

Its turnover has since increased by nearly 50 per cent to £184m and is set to grow strongly again this year.

Mr Cope, who lives near Ilkley, was among the seven people who launched the business in 1989 and worked up from salesman to become managing director.

He bought into the business in 2002 and led its first management buyout in 2003, which was backed by private equity firm 3i in a deal valuing the company at £18m.

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

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

After several years of strong organic growth, Zenith completed its first acquisition in 2008 when it bought Provecta for an undisclosed sum.

The current management stake in the company is believed to be around £15m.

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Zenith customers include Philips, Santander, Asda, Mitie and NATS. The business employs 220 people at its base in a newly refurbished textiles mill in Calverley.

The refinancing, announced yesterday, generated fees for a host of professional services firms.

Deloitte’s debt advisory team and lawyers at Weil, Gotshal & Manges gave advice to Zenith.

KMPG and Squire Sanders provided due diligence, while lawyers at Addleshaw Goddard represented the lenders.

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Meanwhile, Zenith hired a big-hitting new business development manager earlier this month.

Simon Cuenca joined Zenith from Lombard Vehicle Management where he was leading the major corporate accounts team.

He has previously worked for GE Commercial Finance Fleet Services and Lex Vehicle Leasing and has more than two decades’ experience in the fleet industry.

@bernardginns

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