Santander Sets Stage for U.S. Auto Finance IPO

Auto Finance News

Following its recent lucrative Mexican initial public offering, Banco Santander is gearing up for a repeat performance by initiating an IPO of its American auto finance arm, sources close to the matter say. What percentage of its business the lender would sell is unknown.  

Fort Worth, Texas-based Santander Consumer USA has a loan portfolio of roughly $18 billion, and provides loans via more than 13,000 dealerships across the country. The bank plans to carry out the listing in the first half of 2013, and it will seek a valuation of as much as $6 billion.

With Spain in the throes of a deep recession and the continuing European financial crisis, Santander has been selling assets. With the potential IPO, the Spanish lender hopes that the ongoing uptick in U.S. auto sales appeals to investors.  

The sources indicated that plans for listing Santander Consumer USA are still in the early stages, and the timing of the decision is contingent on the market. In the past, the lender has prepared to list units in both the U.K. and Argentina, only to draw back.

If the share sale goes through, it would be Santander’s second IPO in less than six months. The bank raised $4 billion in September when it sold 25% of its Mexican operations. The transaction would also be the lender’s second attempt to secure profits on the auto finance arm. It sold a stake to buyout firms KKR, Warburg Pincus, and Centerbridge Partners last year for $4 billion. Santander retained 65% of the consumer finance operations.

The lender began its U.S. car lending in 2006 following its purchase of Texas-based Drive Financial, and expanded its reach by buying loan portfolios from HSBC, General Electric Co., and Citigroup Inc. during the U.S. financial crisis. Those acquisitions put Santander 14th in a ranking of the nation’s largest financiers, according to the 2012 Big Wheels report.

Santander is in the works to further expand its business, as it’s in advanced talks to become Chrysler Group’s primary lender. The bank is also moving beyond its focus on subprime lending to prime auto lending.

Santander Consumer’s U.S. approach mirrors that of its European operations, where the lender became a Top 3 auto lender in 10 countries after acquiring several consumer finance companies. It recently was set to purchase the loan portfolio of subprime lender DriveTime Automotive Group Inc. as part of a sale DriveTime had planned to a group of investors. Santander shelved the deal after the sale failed.

Investors have had their eye on the U.S. auto finance sector of late. Parthenon Capital Partners announced last week it would acquire White River Capital Inc. and its subprime auto lender Coastal Credit for $79.5 million. Last month, an Aquiline Capital Partners LLC-controlled company closed a $100 million deal to acquire First Investors Financial Services Group Inc.

By market value, Santander is the largest bank in the euro zone, and its Chairman Emilio Botin said in September that it plans to list all its large operations by 2015. Currently, its units in Brazil, Mexico, Chile, Poland, and Spain trade on local stock exchanges.

Exit mobile version