BMW buys car-leasing unit from ING

The New York Times (Amsterdam) - BMW AG's multibrand fleet management division Alphabet acquired the car-leasing unit of Dutch financial services group ING NV for €637 million ($915 million) as part of the German luxury-car maker's wider effort to expand in the area of mobility services.

"Alphabet will increase the number of company car contracts under management to approximately 540,000 and thus consolidate its competitive lead in the European fleet management market," the head of Alphabet, Norbert van den Eijnden, said Friday in a statement. The deal is expected to close in the fourth quarter and is subject to regulatory approvals.

BMW and other premium auto makers such as Daimler AG's Mercedes-Benz brand or Volkswagen AG's Audi unit are looking at options to expand their businesses beyond selling cars to create additional revenue. These projects include car-rental projects for urban areas and related services.

In February, BMW set up a new venture-capital firm, BMW i Ventures, with $100 million in equity, and took a stake in New York-based My City Way, which offers mobile application software for more than 40 U.S. cities that includes information about public transport, parking spaces and local entertainment offerings.

Alphabet plans to provide its customers broadened services in 16 European countries. BMW said that corporate car-sharing plans are among the initiatives Alphabet is preparing. It will also support the introduction of electric vehicles.

ING Car Lease offers car leasing and fleet management services with 240,000 vehicles in eight European countries. With a workforce of around 1,200 employees at Dec. 31 the business's balance sheet was €3.5 billion.

ING last month said it was reviewing strategic options for the business. "The sale of ING Car Lease illustrates ING's continued actions to streamline our business and simplify the company," said ING Chief Executive Jan Hommen. NG Car Lease wasn't on the list of assets that ING was ordered to sell by the European Commission as a condition for the €10 billion state aid it received during the financial crisis.

The Amsterdam-based group currently is executing a restructuring program imposed by the European Commission that requires it to divest its insurance business and some bank assets. The sales will nearly halve ING's €1.3 trillion balance sheet and transform the global financial giant into a European-focused bank that generates the bulk of its profit in Benelux countries.

In June, ING kicked off the disposal program by announcing the sale of Internet bank ING Direct USA to Capital One Financial Corp. in a $9 billion deal. While the sale was welcomed by investors, analysts said ING didn't get the best possible price.

ING said the sale of the car-lease business to BMW is expected to generate proceeds of €700 million, consisting of the €637 million purchase price based on 2010 year-end book value and estimated 2011 earnings until closing. The sale of ING Car Lease will result in a net transaction result of around €335 million and a capital release of around €530 million, which will have a positive impact on ING Bank's core Tier 1 ratio of 0.17 percentage point, based on the core Tier 1 ratio of 10.01% at March 31 this year.

ABN Amro analyst Robin van den Broek said ING sold the car-leasing unit for a good price, adding that the deal was another step toward becoming a well-capitalized bank with a focus on Europe. SNS Securities analyst Lemer Salah also welcomed terms and conditions of the deal.