Navis offloads Europcar

Malaysian-based buyout firm Navis Capital has made its second Australian exit in the past two months, but is currently considering two possible $100 million purchases in the local market.

Navis this week sold the Asia-Pacific businesses of car rental group Europcar, centred mostly around its Australian and New Zealand operations, to the company's European-based franchisor.

The three-year investment, which began with an initial $US25 million and a $US5 million follow-on, delivered an annual internal rate of return of around 20 per cent. Navis had hoped for better, but operational issues and cash flow problems stymied its performance.

More successful was a $US20 million investment in Dome Coffees, which delivered an IRR of around 37 per cent per annum before being sold in February to the management team backed by Perth-based investor Viburnum.

Navis is unusual among buyout firms in that it rarely uses leverage. Of the six Australian investments it held before these latest sales, only two had leverage of any sort and even they were at a relatively modest two times Ebitda, compared to an industry average of five to eight times.

Navis co-founder and director Rodney Muse says the firm likes to focus on operating leverage rather than financial leverage. "We look to get businesses to perform better,” he says.

In the middle of the current credit market woes, that looks a good strategy. "The market is the best it's ever been,” Muse says. Navis has few such competitors in the Australian market and Muse says the company is currently considering two potential transactions, each of around $100 million.

"In Australia we are a very small player and quite opportunistic,” Muse says. "The credit market collapse is an opportunity for us. Whether we avail ourselves of it, we'll have to wait and see.

Navis' other Australian investments include Wendy's, National Lifestyle Villages, Worldwide Online Printing and Peoplebank.