Avis Budget Group Inc. (CAR) successfully completed its pre-announced buyout of Avis Europe plc for 635 million pounds or $1.0 billion. After 25 years, the company has successfully united the two businesses again.
The acquisition has been financed through cash, equity issuance of up to $250 million of Avis Budget, and debt financing. With the acquisition, the company has now become the largest publicly traded rental-car business in the world having branded rental locations in about 175 countries.
The united business of Avis Budget and Avis Europe is expected to generate annual revenues of about $7 billion. The merger of two companies will lead to operating synergies of more than $30 million a year while allowing them to serve the customers more effectively. The acquisition will also give an opportunity to Avis Budget to expand in international markets, including India and China.
After functioning for three years as a private company, Avis Europe was jointly acquired in 1989 by General Motors, a Belgian group D'Ieteren and Avis Budget. In 1997, Avis Europe got its shares listed on the London Stock Exchange with Avis and General Motors selling their stake while D'Ieteren holding a 60% share in the company.
Avis Budget Group is the leading general-use vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 7,800 rental locations and 350,000 vehicles enable the company to bolster its well-established position in a highly competitive vehicle rental industry.
Moreover, continued focus on productivity and cost containment initiatives, better travel trends and lower fleet costs drove the company to post better-than-expected financial results for the first quarter of fiscal 2011.
However, the company faces intense competition from well established players, such as Hertz Global Holdings Inc. (HTZ), Dollar Thrifty Automotive Group Inc. (DTG) and Ryder System Inc. (R). Consequently, the company may face challenges to maintain its high level of operating performance.
Avis Budget shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation. Besides, the company retains a long-term Outperform recommendation.
AVIS BUDGET GRP (CAR): Free Stock Analysis Report
DOLLAR THRIFTY (DTG): Free Stock Analysis Report
HERTZ GLBL HLDG (HTZ): Free Stock Analysis Report
RYDER SYS (R): Free Stock Analysis Report
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