Initial investment is R$250m, but new company still depends on approval by CADE

09/02/2022

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Gustavo Werneck — Foto: Divulgação

Two large and internationally renowned groups from the state of Rio Grande do Sul — Gerdau and Randon — announced this Thursday a joint venture in a segment that is quite different from their areas of activity: the rental of heavy-duty vehicles.

The initial investment will total R$ 250 million, but the goal is to grow and take the lead in a market that the partners consider little explored in Brazil. Without a name yet, the new company will be equally split between the groups. The merger, however, still depends on the approval by the antitrust regulator CADE to become active.

The company will be based in São Paulo, have its own management team, and will be open to receiving future contributions from investment and financial funds, as well as from companies with expertise in the logistics field. The goal is to expand the product portfolio — from trucks and semi-trailers to machines both for construction and agribusiness.

Initially, the focus is on transportation companies as well as independent truck drivers who, in general, have less capital for direct purchases. According to Gerdau’s figures, Brazil has a fleet of 2.6 million trucks and more than 1.2 million are over 15 years old. In other words, they are ready for renewal. “There is a market with a huge potential for the company in the rental market,” Gerdau CEO Gustavo Werneck told Valor.

Sérgio Carvalho, CEO of Randon Companies, said that in the United States, 95% of semi-trailers for containers are acquired through leasing. In general cargo, it’s 30%. “Brazil is starting to come out, but with a small percentage. Therefore, we see a relevant space in this segment,” he said, recalling that Randon had been studying to join this field for years.

For Gerdau, the formation of the joint venture is another step forward in the expansion of Gerdau Next, a new business division that seeks new sources of revenue for the group. It was created in 2021 and has been investing in other businesses, from logistics via a digital platform to the production of graphene. The leasing of heavy vehicles, and in the future also of heavy machinery, is another piece in the portfolio.

“Our relationship dates back to more than 50 years ago, and our business cultures are very similar,” says Mr. Werneck. Mr. Carvalho highlights the long history of the business partnership of the two groups and the tradition of Randon’s business partnerships: 36 years in the U.S. with a local company and 27 years in Germany. “I am very confident in the success of this joint venture,” he told Valor.

The negotiations between Gerdau and Randon began in September 2021 with the evaluation of synergies. The design of the partnership gained speed in the last five months, after studies in 28 cities in seven states and interviews with transporters and self-employed truck drivers.

According to the analysis, Randon is the largest manufacturer of semi-trailers in the country and has more than 80 points of sales in its distribution network of trailers/semi-trailers. Gerdau, through G2L (logistics company by digital platform), has relationships with thousands of trucking companies.

The vehicle rental business, according to both companies, is attractive in terms of profitability. According to market information, EBITDA varies from 70% to 85% over revenue. “In addition, with Randon we can quickly execute the business to raise this value,” Gerdau’s chief executive said.

Currently, this market has been attracting new groups. Vamos, a company of Simpar (Júlio Simões Group), is one of those that have been operating for a few years, in addition to Ouro Verde (Brookfield Fund). Volkswagen Caminhões e Ônibus (the German automaker’s truck and bus business) and Volkswagen Financial Services launched last week a subscription program for truck rental, the first to be offered by one car industry in the country. “We intend to be the leader in this market,” Mr. Werneck said.

Gerdau Next, officially formed in 2021, is made up of several businesses, some of which had already been created within the group since 2018: G2L (digital logistics), G2Base (construction foundations), Juntos Somos + (with 27.5% of shares and operating in construction retail), Gerdau Graphene (production of graphene-based materials), Brasil ao Cubo (33%, modular industrialized construction) and a joint venture with Shell in Brazil for solar power generation in a farm in the northern region of Minas to be built in 2023. The division also includes Gerdau Next Ventures, which focuses on investing and accelerating startups in Brazil and abroad.

Leader in the sectors of semi-trailers, rail wagons, auto parts, and services, Randon has 29 industrial units and is present in 120 countries. In the first half of this year, its consolidated revenue reached R$5.25 billion. Gerdau, the largest Brazilian steel manufacturer and one of the largest long steel producers in the Americas and specialty steel producer in the world, is present in nine countries. From January to June, the company reported net revenues of R$43.3 billion.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/