Brazil approves merger of Localiza and Unidas creating global car rental giant

RIO DE JANEIRO, BRAZIL – Localiza Rent a Car’s acquisition of rival Unidas was approved by the Brazilian antitrust regulator, paving the way for creating a car rental company among the largest in the world.

CADE’s board approved the transaction with restrictions that include divestment of the brand, seeking to mitigate potential competition concerns ahead, the regulator’s chairman, Alexandre Cordeiro, said during a meeting today, Wednesday.

Cordeiro estimated that the new company’s market share should be less than 50% once the remedies, which the rapporteur of the case has not yet made public, are implemented.

Shares of Localiza e Unidas, formally known as Cia de Locação das Américas, were up at least 4% in São Paulo, among the best-performing names in the Ibovespa index, at 1:35 PM local time.

The new company is expected to make a net profit of R$ 3.1 billion (US$ 542 million) next year, with a market capitalization of R$ 49.7 billion (US$ 8.696 billion) BTG Pactual analysts led by Lucas Marquiori wrote in a pre-trial report. That would put it below Avis Budget Group, which is worth US$ 12.7 billion, but above Germany’s Sixt SE (US$ 6.5 billion).

Localiza unveiled its acquisition plans more than a year ago and received the green light from the CADE superintendency in September. Localiza’s shareholders will own about 77% of the new company, while Unidas will hold the remaining 23%. CADE had until January 6 to rule on the case.

Localiza has fallen 13% this year, compared to an 11% decline in the benchmark index over the same period. Given the stock’s discount to its historical average, earlier this week, Bank of America recommended that its clients buy Localiza regardless of the antitrust authority’s decision.

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