I Squared Capital has made the sixth investment from its second infrastructure fund with the acquisition of TIP Trailer Services from China-based HNA Group.
The deal has been agreed through the group’s ISQ Global Infrastructure Fund II, which is expected to imminently hit its $6.5 billion hard-cap. After transactions including a portfolio of Latin American and Caribbean clean energy assets and the $1.9 billion acquisition of Hong Kong fixed-line business Hutchison Global Communications, the fund is 42 percent committed or earmarked, according to I Squared.
Headquartered in Amsterdam, TIP focuses on trailer leasing, rental, maintenance and repair. It currently operates in 17 countries, predominantly across Europe, although it also has a presence in Canada. However, I Squared is planning a more global platform for the company which last year recorded revenues of about €550 million.
“As of now, the company is primarily in Europe but it does have a substantial presence in Canada,” Adil Rahmathulla, partner at I Squared, told Infrastructure Investor. “We like businesses like this, which have a market-leading position but are globally scalable. Our goal would be to leverage its market leading-position in Europe to expand into North America further and to expand into Latin America and Asia.”
Rahmathulla declined to disclose the purchase price for TIP. HNA acquired the company in 2013 from GE, which at the time had a transport equipment fleet in excess of 45,000 units and has since increased to 66,000.
“A large portion of the business is long-term leases,” Rahmathulla explained with regard to TIP’s status as an infrastructure asset. “The leases are typically five years but importantly, they have a very high renewal rate. Most of the customers have been with the company for 20-plus years and utilisation levels have been around 90 percent.”
He continued: “In the trailer market you don’t really have a pan-European company like TIP. It is the number one player in terms of scale and size across Europe. It has the number one or number two position in 16 markets in Europe. That’s not something you see in any business in any sector such as energy, transport, telecoms or utilities, to have such a strong market-leading position.”
TIP will add diversification and growth to I Squared’s European portfolio, which so far comprises Irish utility Viridian Group and Spanish solar firm Grupo T-Solar.