US car hire firm Avis is to buy its European namesake for an agreed £635 million, reuniting the two businesses after 25 years amid growing consolidation pressure in the industry.
Avis Budget said today it would pay 315 pence in cash per share for London-listed Avis Europe , a 60 per cent premium to the stock's closing price yesterday.
The takeover, backed by Avis Europe's 60 per cent shareholder, Belgian car dealership D'Ieteren , would reverse a spin-off of Avis's European arm in 1986.
"The car rental market is more and more consolidated worldwide, it is quite a capital intensive market," Avis Europe chief executive Pascal Bazin said.
"It is natural at one point in time to reunite two companies which are running the same brand in different territories."
Avis Budget expects the tie-up to create a combined group with sales of $7 billion a year across more than 150 countries, while generating cost savings of $30 million a year.
The US business, which has lagged its European counterpart's expansion in emerging markets, also stands to gain access to Avis Europe's fast-growing Indian and Chinese operations.
Avis Budget, which is also vying with rival Hertz to buy smaller US rival Dollar Thrifty Automotive Group , said it remained in talks with competition authorities over the potential takeover.
Consolidation in the US car rental market has been rapid, leaving just four major players - Hertz, Avis, Dollar Thrifty, and privately-owned Enterprise Rent a Car.
Avis Budget said it planned to finance the takeover of Avis Europe, expected to close in October, through a combination of its own cash, debt, and the proceeds of a potential $250 million share sale.
Avis Europe's Bazin said it was too early to estimate what the impact of the tie-up on his company's 6,000 strong workforce would be.
Avis Europe shares were up 58 per cent at 310.25 pence by lunchtime. Shares in Euronext-listed D'Ieteren, which has held a stake in Avis Europe since 1989 and stands to get £367 million from the sale, were up 11.7 per cent at 49.91 euros.
Avis Europe is advised by Barclays Capital, while Morgan Stanley and Citi are advising Avis Budget.
Reuters