(Adds share reaction, Localiza comment, industry background)
SAO PAULO, Sept 23 (Reuters) – Brazilian rent-a-car company Localiza has agreed to take over rival Unidas for roughly 12 billion reais ($2.18 billion), the companies said on Wednesday, creating a major player that could account for more than 10% of all cars sold in Brazil.
Localiza’s shares rose nearly 14%, while Unidas’ shares rose by more than 20% on the surprise announcement, which analysts said could face some antitrust risk as it would reduce the number of large rental car companies in Brazil from three to two.
Rental car companies in Brazil have emerged mostly unscathed from the country’s recent economic crises, partly thanks to steady demand from formerly unemployed Brazilians, who have rented cars en masse to drive for companies like Uber.
This consistent demand for long-term rentals has differentiated Brazilian rent-a-cars from companies like Hertz Global Holdings in the U.S, which filed for bankruptcy. Brazil also does not have a large car leasing market, leaving longtime rentals as the main alternative to purchasing autos.
“Renting is the new buying,” Localiza said in a presentation on the deal that accompanied a securities filing.
Localiza will hold a 77% stake in the combined company, it said, and pay a 9% premium over Unidas’ closing stock price on Tuesday.
The third large rental car firm in Brazil, Movida Participacoes, had no immediate comment. Analysts at the bank Bradesco BBI estimated in a research note that the new Localiza would have a fleet more than four times larger than Movida.
Localiza is also the single largest car buyer in Brazil, which is Latin America’s largest car market with sales of over 2 million vehicles a year before the pandemic.
Reuters reported last year how rental car companies had transformed Brazil’s auto market, to the detriment of automakers, especially General Motors Co, whose margins imploded as the rental car companies’ negotiating power rose based on ever-larger bulk orders.
The deal would give Localiza even more sway in price, while leaving Movida a more distant second.
Both Localiza and Unidas said the deal aims at creating a global player, besides increasing efficiency. The firms added they plan to reach a deal with rental car firm Enterprise Holdings to extend its mutual referral agreement with Unidas to Localiza.
After the deal, Localiza’s founders will appoint six board members, while Unidas will name two. ($1 = 5.5000 reais) (Reporting by Carolina Mandl and Marcelo Rochabrum, additional reporting by Paula Laier Editing by Bernadette Baum and Timothy Gardner)