Avis Budget (NYSE:CAR) is buying its European counterpart for 635 million pounds ($1 billion) is an effort to reunite the Avis and Budget brands under one corporate umbrella and boost its strategic options.
The move comes as Avis tries to acquire antitrust approval in a heated battle for rival Dollar Thrifty Automotive (NYSE:DTG) against Hertz (NYSE:HTZ), which rejoined the fight last month with a significantly higher bid.
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With its European business, Avis Budget will be the largest publicly traded car rental business in the world, which would help it overcome a defeat against Hertz. Avis chances of getting antitrust approval for a Dollar Thrifty buy may be slim due to the competitiveness of the two companies budget brands.
In a statement released Tuesday, Avis said it has made progress in its discussions with the Federal Trade Commission regarding Dollar Thrifty, and noted that while it will continue to monitor that situation, its now focusing on completing and integrating the Avis Europe deal.
Avis Europe operates the Avis brand through a network of more than 3,100 locations in 112 countries, wholly-owned subsidiaries in 13 countries and license agreement in another 99 countries. The group also operates the Budget brand through 950 locations in 59 countries.
This transaction represents an outstanding opportunity for Avis Budget, and the acquisition of a business that we have long sought to own, Avis Budget CEO Ronald Nelson said in a statement. 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.
Under the terms of the deal, Avis will acquire all outstanding shares of Avis Europe for 3.15 pounds each in cash. The transaction is slated to close in October, pending Avis Europe shareholder and court approval and other regulatory clearances.
Several Avis Europe shareholders, including DIeteren, which holds some 60% of the company, have already committed to support the transaction.