Corporate payments provider Wex will acquire the assets of ExxonMobils European commercial fleet fuel card program, called the Esso Card.
The acquisition advances South Portland, Maine-based Wex's international ambitions by establishing a European presence with a closed-loop fuel card network with 1 million cards accepted at 6,000 Esso-branded service stations in nine countries: Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway and the United Kingdom. Cross-acceptance with other European oil companies' fuel card programs extends the Esso Card's reach to a total of 13,000 sites in 18 countries.
Wex will have control over operations, funding, pricing, and sales and marketing functions of the Esso Card and will sign a 10-year agreement with ExxonMobil that includes use of the Esso brand, supply agreements with Esso affiliates and merchant acceptance on the Esso Network. In carving out the Esso commercial fuel card program, Wex is acquiring ExxonMobil subsidiaries in France and the U.K., as well as assets from seven units. Wex plans to take on 175 ExxonMobil employees when the deal closes.
"This deal is unique in the fleet card space because Wex will actually own the customer relationships upon closing of the transaction traditionally, oil companies outsource management of their portfolios but retain ownership of their customers," Wex CEO Michael Dubyak told analysts during a Nov. 8 conference call.
The deal represents Wex's largest-private-label fleet card program. Wex will pay a base purchase price of 60 million (US$80.1 million), plus the par value of the accounts receivable balance of the program, which is valued at $230 million to $250 million today, but may fluctuate before the deal closes in late fourth quarter 2014 or first quarter 2015.
The deal is subject to regulatory approval and other conditions and before it closes. Wex will invest $10 million to $13 million to integrate operations and systems, including transferring the Esso Card Network onto Wex's international fleet card processing platform, which is planned for 2015.
"What this does for us is give us the foundation for future growth," said Wex President Melissa Smith, who will succeed Dubyak as CEO when he steps down in 2014.
The portfolio is expected to generate $35 million in annual revenue, based on current exchange rates. Revenue is generated from a combination of sources, including the spread between wholesale and retail card interest rates, per-liter transaction fees and other program-related fees.
"It is not tied to the price of gas like you would see in the North American market," Dubyak said.
In North America, Wex issues the ExxonMobil Fleet and Universal cards in the U.S. and Canada. That relationship will continue to operate independent of the Esso Card acquisition, but Smith said Wex will have the opportunity to apply techniques and practices that are successful in one portfolio to the other.
The Esso transaction will be executed through Wex Europe Services Ltd., a joint venture formed earlier this year with Radius Payments Solutions, a fuel card sales and management business with 1.5 million cards across Europe. Wex holds a 75% stake in the venture and will leverage the Crewe, England-based fuel card reseller's sales and marketing expertise in the European market.
The Esso brand's roots can be traced back to the 1911 antitrust breakup of John D. Rockefeller's Standard Oil Co. Standard Oil of New Jersey (the predecessor to today's ExxonMobil) began using the phonetic spelling of the S.O. initials for its service stations in 1926.
Legal challenges to the name brought on by other Standard Oil spinoffs caused the Esso brand to die out in the U.S. But the brand lived on at European service stations operated by the Anglo American Oil Co. (renamed Esso Petroleum Co. in 1951), an international subsidiary that Standard Oil established in 1888 and that Jersey Standard acquired in 1930.