Avis Budget, a U.S.-based car hire company, will be reuniting with its European namesake after 25 years, as it purchases the Avis Europe for an agreed 635 million pounds ($1.0 billion).
Avis Budget will pay 315 pence per share, which is a 60 percent premium to the stock's closing price on Monday. The takeover would reverse a 1986 spin-off of the company's European arm. This move is backed by Belgian car dealership D'Ieteren, which is the shareholder holding 60 percent of Avis Europe.
CEO Pascal Bazin of Avis Europe told Reuters that the car rental market is becoming more consolidated around the world and is quite a capital intensive market.
He added that it is normal for two companies running the same brand in different locations to reunite at one point in time. Avis Budget foresees the tie-up to create a combined group with $7 billion annual sales across more than 150 countries, while obtaining annual cost savings of $30 million.
The company's U.S. business, which has lagged the European-based one's expansion in emerging markets, also stands to gain entry into the fast-growing Chinese and Indian operations of Avis Europe.
The U.S.-based business said it is planning to finance the takeover by combining its own debt, cash and proceeds of a possible $250 million share sale. The takeover is expected to close in October. Bazin disclosed that it was still too early to estimate the impact of the takeover to the 6,000-member workforce of Avis Europe.