The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian electric car dealer will likely seek to go public within the next five to seven years if planned expansion targets are hit, its new 35 percent minority shareholder revealed yesterday.

Michael Anderson, RF Bank & Trust’s president, told Tribune Business that Easy Car Sales, the company that represents the first equity investment for its Strat Equity Fund, is aiming to grow its market share to “somewhere between” 15-20 percent of all vehicle sales in The Bahamas within the next several years.

Voicing optimism that the private equity-style fund’s first investment will “surpass expectations”, he explained that Easy Car Sales “ticked a number of boxes” for RF as a growing company with the prospect of generating increased profits in a sector the investment bank has long sought to become involved in - sustainable development.

The RF chief told this newspaper that market trends, such as the reduced cost of electric vehicles and associated import duty concessions granted by the Government within recent years, combined with rising energy and gasoline costs would help drive Bahamian consumers to this segment.

“I think the duty concessions that the Government announced over the last few years have made it much more attractive for people to buy electric vehicles than previously,” Mr Anderson said, with gasoline costs still well above $5 per gallon. He added that it would cost electric vehicle drivers just $1.50 to travel the same distance as an ordinary car using $5.50 of gasoline.

“It’s a lot cheaper for people to drive these fuel efficient cars, and the price points they are bringing them in at, you can now get electric vehicles for $40,000,” the RF president said. “Ongoing maintenance costs and less, and the cost of fuel is less, so as people become more knowledgeable about electric vehicles you will have more people buying them.

“You’re going to see more cars coming to market. It takes a while to build-up what cars come to market with multiple suppliers, but my sense is that Easy Car Sales has a good supply and getting a greater variety of offering including trucks.

“They are starting to get a lot more traction in terms of sales,” Mr Anderson continued. “They are between 5-10 percent of the total market now, and are looking to get to somewhere between 15-20 percent of the market. The market size is somewhere between 1,500 and 2,000 cars sold per year, so if they can get themselves up to 15 percent that will be 300 cars. Somewhere between 300 to 400 cars is where they’re looking to get to in the next couple of years.

“The timing is really good for them to be in the market now with duties down and people looking for longer-term solutions for themselves. Easy Car Sales is well-positioned to take advantage of trends in the market.”

Private equity funds, such as the Strat Equity Fund, work differently from how traditional mutual and investment funds have operated in the domestic Bahamian capital markets. While the latter acquire shares in companies, these tend to be firms that are publicly traded and listed on the Bahamas International Securities Exchange (BISX), with positions often held for the long-term.

In contrast, private equity funds acquire shareholdings in private companies with the goal of turning these firms around, generating returns for their investors by making them more profitable and efficient before recovering the initial principal outlay by seeking an exit route for their investment. This is often done by taking the firm public via an initial public offering (IPO), and the Strat Equity Fund will typically seek an exit after five to seven years.

Mr Anderson, confirming that the Strat Equity Fund has acquired a 35 percent minority equity interest in Easy Car Sales, while declining to reveal the purchase price paid, disclosed that an IPO is likely to occur eventually with Easy Car Sales in line with the fund’s ambitions.

“The expectation, the agreement we have with Easy Car Sales is they would probably look at taking the company public within a five to seven-year period, which is consistent with what the intentions of the fund are,” he told Tribune Business.

“When we invest in these businesses, there’s this expectation that everyone has, so I’m really hoping this investment surpasses our expectations. We believe there’s a greater opportunity than we thought when we first had discussions with them; that there’s an opportunity far greater than what we had initially planned. I think there’s a huge opportunity for the company, and for the company to realise this opportunity and strategise how it goes about it.”

Mr Anderson said auto financing, leasing and second hand car sales were among potential opportunities that Easy Car Sales is either eyeing or can exploit outside its core business, along with maintenance and supplying electric vehicle batteries.

He added that RF is hoping to add “at least two more companies” to the Strat Equity Fund’s portfolio within the next three to six months, and is talking to three potential targets at the moment although he declined to name them.

“We’re looking to maybe get ten investments in the fund at any one time,” Mr Anderson said. “We’re not rushing to get investments. We’ll be very selective with who we take on. We want the fund to be very successful and do well, so we’ll be very selective on who comes into the fund.”

Pia Farmer, partner at Easy Car Sales, told this newspaper earlier this week that the tie-up with the Strat Equity Fund will “accelerate” the company’s growth, enable it to relocate to a new head office and expand its workforce, and also allow it to relaunch its in-house financing and vehicle leasing operation “in the next few weeks’.

“It’s a great benefit to Easy Car Sales to have RF show such confidence in our plans, in our vision and in our product, and also have so much faith in our team to deliver profits for investors and benefits to people who invest in the Strat Equity Fund,” she told Tribune Business. “For us, it’s significant in terms of an injection not only of capital but knowledge and experience from RF. They have a lot of expertise and tools to help us advance more rapidly......

“It’s going to help us to grow. We have already outgrown our current location. One of the plans is an expansion to a new location, headquarters and showroom. We’ve just added an additional brand in Jac Motors, and we need more space and we need more team members. It’s going to help us expand physically on what we’re able to do.”

Confirming that this involves a move from Easy Car Sales’ current site on Gladstone Road, Ms Farmer declined to identify its new home on the basis that the real estate transaction is “still being closed”, but added that it will be to “a major location” on New Providence.