Tuesday, 14 June 2011 at 15:19, Reuters, London
US car hire firm Avis is to buy its European namesake for an agreed £635 million ($1.0 billion) to reunite the two businesses after 25 years, amid growing consolidation pressure in the industry.
Avis Budget said on Tuesday it was paying 315 pence per share for London-listed Avis Europe, a 60 per cent premium to the stock's closing price on Monday.
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 told Reuters.
"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 $7bn 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 said it planned to finance the takeover, expected to close in October, through a combination of its own cash, debt, and the proceeds of a potential $250m share sale.
Bazin said it was too early to estimate what the impact on Avis Europe's 6,000 strong workforce would be.
Avis Europe shares were up 58 per cent at 310.25 pence by 0855 GMT. Shares in Euronext-listed D'Ieteren, an Avis Europe shareholder since 1989, were up 11 per cent at €49.50.
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