Fleetcor Technologies CEO Hosts AllStar Business Solutions Acquisition (Transcript)

Fleetcor Technologies, Inc. (FLT)

Mergers & Acquisitions Call

December 13, 2011 11:00 am ET


Eric Dey - Chief Financial Officer

Ron Clarke - Chairman and Chief Executive Officer


Glenn Fodor - Morgan Stanley

Roman Leal - Goldman Sachs

Reggie Smith – JPMorgan

Tim Willi – Wells Fargo

Wayne Johnson - Raymond James

Darrin Peller -Barclays Capital



Good day, ladies and gentlemen, thank you for standing by. Welcome to the Fleetcor Technologies conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions] This conference is being recorded today, Tuesday, December 13, 2011.

At this time, I would like to turn the conference over to Mr. Eric Dey, Chief Financial Officer. Please go ahead, sir.

Eric Dey

Good morning, everyone and thank you for joining us today. By now, everyone should have access to our press release announcing our acquisition of AllStar Business Solutions Limited from The Arval Group for £194 million or approximately $304 million. It can also be found at www.fleetcor.com under the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements regarding the transaction between Fleetcor and Arval, future financial and operating results, benefits of the transaction and other statements about management’s future expectation belief, plans or prospects. They are not guarantees of future performance and therefore you should not put any undue reliance on them.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of those risks are mentioned in our press release and our 8-K filed with the Securities and Exchange Commission. In addition, during the course of the conference call, we may make reference to non-GAAP financial information including adjusted revenues and adjusted net income. This information is not kept with GAAP and maybe calculated differently than other companies similarly titles non-GAAP information. Quantitative reconciliations of our historical non-GAAP financial information to the most directly comparable GAAP financial information are included in our filings with the SEC, which are also available through our website.

With that out of the way, I would like to turn the call over to Ron Clarke, our Chairman and CEO. Ron?

Ron Clarke

Thanks, Eric and thanks to everyone for joining the call this morning. I am really delighted to confirm our acquisition of AllStar and to welcome the AllStar team to the Fleetcor family. We are also very appreciative of Arval and BNP for giving us the opportunity to acquire such a terrific business.

So, now on to the announcement. Yesterday, we closed on a 100% of the share capital of AllStar Business Solutions Group for £194 million in an all cash deal and although we have done 40 deals since our founding this is the single largest deal in our company’s history. So what I would like to do is cover three subjects related to this transaction. First, a brief overview of the AllStar business, second the strategic rationale for the deal and finally the financial considerations.

So let me start with a brief overview of AllStar. AllStar is a large but very focused fuel card provider. It’s a pure play commercial fuel card company namely serving U.K. based businesses of all sizes along with some meaningful strategic partners like Arval. The company has approximately 40,000 business customers and nearly 1 million card holders and AllStar’s acceptance network includes all major U.K. fuel brands.

Now, in addition, AllStar has a number of very attractive assets. It has got very satisfied customers with single digit attrition rates. It has an established well regarded brand name. It has a fixed fee revenue model. Such that revenues are stable and predictable. It enjoys excellent long standing relationships with its major brand and fuel merchants and it has a great group of very experienced people. So, all-in-all, a really attractive set of assets.

So, now I will move on to talk about the strategic rationale for the deal. Our acquisition strategy is to buy things we know and buy things we can improve. So first off, AllStar does only fuel cards and we know fuel cards. Second, AllStar operates in a market we know and understand and third, we believe that we can help AllStar realize its full potential. For example, we can help grow the business faster by better utilizing the web. Today, the web accounts are approximately 20% of Fleetcor’s new sale but virtually zero of AllStar’s. So clearly some upside there.

We have a great global processing platform that can improve product performance and dramatically reduce ongoing operating expense and we believe AllStar’s new independence from Arval can potentially open doors with other U.K. based leasing companies. So, in conclusion, it’s a deal with a very clear and very achievable investment piece.

Now, let me transition to the financial considerations for the deal. We paid an attractive price, particularly given, we received £50 million positive working capital at close. We expect this AllStar transaction will add at least $0.20 to our 2012 cash EPS or about 10% growth for the company’s cash earnings and post this transaction we will still have over $500 million of capital to pursue new acquisitions.

So, on closing, we couldn’t be happier with this deal. We acquired a big attractive business right in our wheelhouse. We paid an attractive price and we like our chances to improve profit performance overtime. We also fully expect this transaction will provide good financial returns.

Read the rest of this transcript for free on seekingalpha.com

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