KKR out in race for Westpac auto loan business

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    Private equity firm Kohlberg Kravis Roberts is reportedly out of the running in the bid to snap up Westpac’s auto loan business.

    KKR’s reported exit leaves private equity firm Cerberus and non-bank lender Liberty Financial as the likely frontrunners to acquire the business, according to a report by The Australian. Bain Capital and Allied Credit have reportedly bid for the business but are not considered strong contenders.

    TPG Capital had been partnering with Liberty Financial in an attempt to acquire the business, but has reportedly backed off for now, The Australian reported.

    It was believed that KKR would have purchased Westpac’s auto loan business, and its recently listed non-bank lender, Pepper Money, would have managed it. However, KKR was reportedly not keen to take across any of the management in the auto loans business when it was the new owner, according to The Australian.

    Final bids for Westpac’s auto loans unit are due on Friday.

    After initially attempting to offload all of its auto loans operations, Westpac chose to retain almost all of the existing loans, so the opportunity for buyers is mostly to generate new business, according to The Australian. The size of the portfolio of loans on offer has shrunk from $11 billion to about $2 billion.

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    Market experts estimate that the valuation of the goodwill for the operation is between $450 million and $700 million. The unit writes about $5 billion in loans each year.

    The sale of the unit is part of Westpac’s continuing move to offload its non-core assets in an attempt to simplify its business, The Australian reported. The sale comes after regulators introduced more stringent rules on auto loan interest rates.

    Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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