(Bloomberg) — Localiza Rent a Car SA and Unidas, two of Brazil’s largest providers of rental cars, signed an agreement to combine their businesses in an all-stock deal.
Localiza shareholders, including founder Salim Mattar, will own 76.85% of the new company, while Unidas holders will have a 23.15% stake, the firms said in a filing Wednesday. Cia de Locacao das Americas, as Unidas is formally known, will become a subsidiary of Localiza.
The agreement sent shares surging in Sao Paulo, with Localiza jumping as much as 17% to an all-time high and Unidas climbing 22%.
The deal is expected to close in 2021 and is subject to approval by shareholders from both companies and Brazil’s antitrust regulator Cade. If the transaction goes through, Unidas may pay 425 million reais in dividends to its shareholders, according to the filing. Bank of America and Banco Itau BBA advised Localiza and Unidas, respectively.
Before the announcement, Localiza had a market value of about 39 billion reais ($7 billion), while Unidas was worth 11 billion reais. The combined company will have a consolidated fleet of almost 491,000 vehicles.
The new firm will reach a market share of about 61% in the rental car segment, up from 46%, according to calculations from Bradesco BBI analyst Victor Mizusaki. “Antitrust approval is the main risk,” he wrote in a note.
Last month, Localiza terminated its partnership with Hertz, which filed for bankruptcy amid the pandemic. Localiza saw net income fall more than 50% in the second quarter from the year before as the disease rocked the Brazilian economy, eroding jobs and forcing people to stay home.
(Adds stock move in third paragraph, banks involved in fourth paragraph and Bradesco BBI comments in sixth paragraph)
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