Randon makes a three way partnership with Gerdau and enters into truck leasing
- September 19, 2022
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Randon – the maker of trailers, brakes and suspensions from Caxias do Sul – has just announced a joint venture with Gerdau to enter the truck and equipment rental segment, beating Vamos, which today largely dominates this market.
Gerdau is investing through Gerdau Next, its new business arm focused on sustainability, construction and mobility.
The JV – which does not yet have a name – will be split 50/50 between the two companies.
Initially, the companies will invest BRL 250 million in the new company – and the investment will be phased in three years (BRL 100 million this year, BRL 100 million next year and the rest in 2024).
Randon’s entry into leasing is not exactly a surprise. In August 2020, the company had already announced preliminary studies to enter this market.
Considering a capital structure, between equity and debt, 50/50 or 70/30, Bradesco BBI estimates that the new company could buy a fleet of between 1,740 and 2,900 trucks over the next few years.
For comparison purposes, Vamos has more than 33 thousand assets (27 thousand trucks and 6.7 thousand machines and equipment).
The Simpar Group company operates with a rental rate of 2.7% per month and an EBITDA margin of 80%. Based on these numbers, Bradesco estimates that the new JV could reach revenue of R$147 million to R$245 million, with an EBITDA of R$118 million to R$196 million.
Applying the same EV/EBITDA multiple that Vamos trades today (13.5x), Bradesco calculated that the new company could add from R$2 to R$3.10 per share to Randon’s fair value, which the bank calculates in R$ 17. The paper trades at R$ 10 today.
The deal is small for the two companies, but one investor noticed that there are synergies with the core business of the two.
Randon can use the JV to leverage its truck sales operation (today it already sells these implements to Vamos), while Gerdau can use the new company to boost its logistics operation, G2L, which already earns BRL 1 .4 billion.
BTG analysts also noted that the initiative “opens up a new avenue of long-term growth” for Randon, with a “highly predictable” revenue line, addressing concerns about business cyclicality.
For Vamos, the entry of Randon and Gerdau in the market seems negative, as it adds a strong (and well capitalized) competitor. The news also comes a few weeks after Volkswagen announced it is entering the B2C truck rental market.
Still, “the truck and trailer rental market is still in its infancy,” Bradesco wrote. “We see room for new players come in and help educate the consumer.”
Source: Brazil Journal