Avis Budget has reached a £635 million agreement to buy Avis Europe thereby reuniting the two car hire companies which split 25 years ago.
Avis Budget Group, which is headquartered in New Jersey, is a leading vehicle rental operator in the United States, Canada, Australia, New Zealand and some other regions through its Avis and Budget brands.
Avis Europe, which is headquartered in London, operates in Europe, Africa, the Middle East and Asia, where it operates the Avis and Budget brands.
Avis Europe operates the Avis brand under licence from Avis Budget across four continents via a network of over 3,100 locations in 112 countries, through wholly-owned subsidiaries in 13 countries complemented by licence arrangements in a further 99 countries. Avis Europe operates the Budget brand - the licence in respect of which it acquired in 2003 - across three continents through over 950 locations in 59 countries.
The acquisition, which is expected to be completed by October subject to Avis Europe shareholder approval, court approval and regulatory clearances, unifies Avis and Budget brands globally under single corporate ownership. The deal is not expected to face regulatory scrutiny because there is little overlap between their respective operations.
Avis Budget has already received ‘hard’ irrevocable commitments from Avis Europe’s majority shareholder, Belgium company D’Ieteren, whose holdings represent approximately 60% of the share capital of Avis Europe as well as from the directors on Avis Europe’s board.
“This transaction represents an outstanding opportunity for Avis Budget, and the acquisition of a business that we have long sought to own,” said Ronald L. Nelson, Avis Budget Group chairman and chief executive officer.
“The transaction re-unites the global operation of the Avis and Budget brands under one corporate umbrella, and is both financially and strategically compelling. We expect the combination of our two companies will allow us to more effectively serve vehicle rental customers worldwide, and to achieve operating synergies of more than $30 million a year.
“In addition, the acquisition will give Avis Budget an increased presence in rapidly-growing international markets, including India and China.”
Completion of the deal will mean that the Avis Budget and Avis Europe businesses will have annual revenues of approximately $7 billion and owned or licensed operations in more than 150 countries.
Pascal Bazin, chief executive of Avis Europe, said agreement on the deal provided ‘both a compelling substantial immediate cash return to shareholders and an exciting opportunity for Avis Europe’s customers, employees, partners and licensees to benefit from the many advantages that will come from being part of a combined Avis Europe and Avis Budget Group with our two strong global brands, increased scale and improved access to capital’.
Meanwhile, Avis Budget says it will continue to monitor the Dollar Thrifty situation. The company has been in a fight for more than a year with rival rental firm Hertz to acquire their smaller US rival.
However, reports suggest that the acquisition by Avis Budget of Avis Europe is likely to be seen as signalling a shift away from its pursuit of Dollar Thrifty, the fourth-largest US car rental operator. Nevertheless, people familiar with the matter said the company was not planning to walk away definitively.