Avis Budget Group Inc. has agreed to acquire its Budget Car Rental licensee for Southern California and Las Vegas for approximately $210 million, plus the cost of acquired fleet.
The acquisition is expected to add $100 million of revenue and more than $25 million of Adjusted EBITDA to Avis Budget Group, after synergies, and is scheduled to close in fourth quarter 2014 — subject to customary closing conditions, according to the company.
The Budget licensee operates directly at Los Angeles International Airport and Burbank Bob Hope Airport, as well as many local market locations throughout the Los Angeles metropolitan area. It also generates licensing income from its sub-licensees that operate throughout Southern California and in Las Vegas.
"This substantial property is the largest Budget licensee in North America and has been on our acquisition target list for a long time,” said Ronald L. Nelson, Avis Budget Group chairman and chief executive officer. “I'm pleased that we will be able to acquire this strategic asset at a multiple that will be accretive to earnings."
"Southern California is one of the largest gateway markets for inbound travelers in North America, and operating both the Avis and Budget brands there will allow us to capture more of this profitable business, as well as drive significant revenue and cost synergies," added Nelson.
Budget Car Rental has operated in southern California since being founded by the Mirkin family in 1958, and the licensee held a long-standing, exclusive, royalty-free right to use the Budget brand there. This acquisition includes owned operations at Los Angeles International Airport, the largest airport in the United States based on revenue, says Avis.
Morris (Morey) Mirkin started Budget Rent A Car in Beverly Hills in 1958.
In addition, sub-licensed locations such as Orange County's John Wayne International Airport, San Diego International Airport and Las Vegas' McCarran International Airport will now become licensees of Avis Budget Group, and the company will now receive royalties from them.
"This investment will enable us to substantially increase our off-airport presence in southern California, capturing a larger share of this important car rental market," said Tom Gartland, president, North America, Avis Budget Group. "In addition, we will be able to immediately leverage the existing infrastructure of our existing Avis brand in the region to expand the Budget footprint, enhance brand loyalty and increase our profitable revenue growth."
Avis Budget expects to fund the acquisition with available cash and incremental corporate debt borrowings, says the company.