Forklift News - Barloworld sells UK forklift lease book for GBP109 million

By Bill Redmond

Barloworld has sold its UK forklift lease book to GE Capital Solutions for GBP109 million (USD209.6 million).

The sale "fulfils our goal to sell finance businesses that do not give adequate returns for the group," Barloworld CEO Tony Philips said.

The deal will not mean any goodwill write down.

As Barloworld's preferred lessor, GE Capital Solutions will buy 8,600 contracts, 95 per cent of which involve forklifts. The deal excludes GBP51 million (USD96.8 million) of other UK leasing assets, mainly relating to long-term contracts with the UK Ministry of Defence that are not assignable under the terms of the agreements.

Barloworld will continue to sell and maintain forklifts, mainly Hyster trucks.

In an exclusive interview with Forklifaction.com News, Barloworld Industrial Distribution finance director Robert Russell said from North Carolina that the company’s returns on equity (ROE) over the last five years have been good, relative to other finance businesses. ROE was not bad nor declining in the UK, despite "very aggressive" competition.

But Barloworld evaluated its businesses not on ROE but ROI (return on investment). Owing to the heavy investment required in a finance business, "ROI is very difficult to achieve, owing to the required economies of scale".

However, finance businesses "are attractive to GE, which specialises in financing, and can use the addition of this book to further improve economies of scale", Mr Russell said.

Asked if Barloworld customers might move on when their existing contracts expired, because of a perceived loss of leverage, Mr Russell said that, from the customer point of view, there was still only one interface and that was with Barloworld.

"We fully intend to keep service levels at the current excellent standard and, by letting GE run the financing side of the business, we are poised to avoid any distraction to provision of excellent service."

In the UK, 70 per cent of all forklifts acquired are through lease or rental deals, in which Barloworld has played a leading role for more than 30 years. At one stage Barloworld designed its own man-up very narrow aisle forklift.

The deal closely follows Finning's sale of its UK forklift division to Briggs Equipment UK, involving a one-time after tax loss of CAD33 million (USD28.8 million).

Barloworld sold its US forklift lease book to Hyster Capital for USD77.3 million (Forkliftaction.com News #277).

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