CEO: Fleetcor ‘Quite Active’ in M&A Talks

Fleetcor CEO Ronald Clark acknowledged to analysts on July 31 that that the company is in active merger-and-acquisition talks, some of which are in the “late innings.” He declined to go into any specifics, however, including whether discussions are underway to acquire rival Comdata, as has been rumored. Clark threw out a $1.5 billion figure as his acquisition budget for the next three years. Would the company raise the amount if the right deal came along?

B2B fleet card company Fleetcor Technologies Inc. is ready to buy, but whether the rumored deal to acquire Comdata is in the mix, company executives weren’t saying during Fleetcor’s July 31 call with analysts to discuss second quarter earnings.

Earlier this week,, citing a Reuters story, reported that Fleetcor was said to be in talks to acquire Comdata, itself a major B2B player in the fuel card space. Such a deal would represent one of FleetCor’s largest and expand its capabilities in electronic payment processing.

During the analysts call, Ronald Clark, Fleetcor chairman and CEO, acknowledged that the company’s merger-and-acquisition pipeline is “quite active,” but he didn’t go into specifics.

“As often is the case, we’re involved with a number of interesting targets, some of which are now in the late innings,” he said. “We remain quite confident that we can invest $1.5 billion in deals over the next 3 years.”

That sum would be about half the reported more than $3 billion Comdata would go for. Pressed later on the call whether Fleetcor would spend more than the projected $1.5 billion on deals, Clark mentioned it would if the right deal came along, possibly as much as three times that amount.

“I think I’ve been consistent that, we kind of want to run a company that’s circled three times, is kind of where we are from a management perspective,” he said. “So I think depending on what we would buy, that would give us significant capacity.”

Commenting earlier this week on the Fleetcor/Comdatra rumors, Melissa Smith, Wex president and CEO, dubbed the report as “entirely speculative,” noting, however, that Comdata has businesses that run across those WEX supports, including fleet cards, over-the-road services and commercial payments.

“We feel very good about the position we’re in that we’re growing, how we’re positioned within the marketplace and how we’re winning business, regardless of what happens to Comdata,” Smith said in the interview.

Shell Germany update

Also during the call, Clark mentioned that progress is ahead of schedule with Fleetcor’s deal announced in May to acquire Shell’s small and midsize enterprise fleet card accounts, starting in Germany and potentially including 12 additional Shell portfolios in European markets. Fleetcor is planning to convert the Shell Germany portfolio in September and launch simultaneous Web marketing and initial telesales efforts.

“We should be officially up and running in Germany and boarding new businesses this quarter,” Clark said. “Once we’ve proven our performance in Germany, we’ll work with Shell to finalize a time to roll out into additional markets. There could be another market or two before yearend.”

Europe has become a competitive hotbed for Fleetcor and rival Wex, both of which reached deals recently to broaden operations in the region.

Q2 performance

During the quarter ended June 30, FleetCor generated net revenues of $273.5 million, up 23.8 percent from $220.9 million a year earlier, driven by strong organic growth and the acquisitions it closed over the past years, according to the company’s 8K filing with the U.S. Securities and Exchange Commission. This includes Fleetcor’s acquisition in October of NexTraq, a U.S.-based telematics company. In June, Fleetcor acquired another telematics company, Masternaut, as the firm explores telematics as a potential business line.

After merchant commissions, adjusted revenues totaled $253.2 million, up 25.8 percent from $201.3 million. Net income rose 21.1 percent, to $88.5 million from $73.1 million.

In North America, transaction volume reached 42.7 million, up 3.9 percent from $41.1 million. With Q2 2014 net revenue per transaction of $3.25, net revenues for the quarter were $138.9 million, up 16.2 percent from $119.5 million during Q2 last year, when net revenue per transaction was $2.90.

International transaction volume was 47.5 million, up 25.7 percent from 37.8 million. For Q2 2014, with net revenue per transaction of $2.83, total revenue was $134.6 million, up 32.7 percent from $101.4 million during the same period last year, when the net revenue per transaction was $2.68.

Globally, transactions totaled 90.2 million, up 14.2 percent from 79 million. Net revenue per transaction was $3.03, up 8.2 percent from $2.80 a year earlier.


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