New York, N.Y. -- Cendant Corp., owner of Avis, has agreed to acquire nearly all of Budget Group's assets for $107.5 million in cash. The deal also calls for Cendant's payment of certain transaction-related expenses and assumption of some contracts and trade payables.
In addition, a subsidiary of Cendant will assume approximately $2.7 billion in
Budget Group, the third largest car and truck rental company in the U.S., filed for Chapter 11 bankruptcy protection on July 29.
Cendant will acquire Budget's operations in the United States, Canada, Australia, New Zealand and Latin America. Budget is seeking a buyer for its operations in Europe, the Middle
East and Africa. The company expects that these operations will continue to function as usual under the Budget brand name.
Cendant and Budget Group expect to
complete the transaction during the fourth quarter of 2002.
Following the acquisition, Budget will continue to operate as a separate and independent brand.
"We believe that bringing Budget into our family of companies provides numerous synergies with Cendant's existing lines of business," said Henry R. Silverman, chairman, president and chief executive officer of Cendant. "Beyond the clear cost efficiencies of combining overhead and administrative functions of Avis and Budget, adding the Budget brand to our travel mix will allow us to reach value-conscious travelers more effectively through our timeshare, travel services and online booking channels."
Sandy Miller, chairman and CEO of Budget Group, added: "As a strategic buyer, Cendant will provide numerous resources to strengthen and grow Budget's rental operations. In addition, joining forces with Cendant will allow Budget to operate as an independent brand, enjoy
many synergies created by this transaction and continue serving its customers in the same quality manner."
Cendant and Budget have agreed to assemble a transition team of senior managers. Cendant
does not anticipate changes in Budget's operational management or workforce that would affect service to customers or suppliers.
Cendant will not assume roughly $750 million of Budget's non-vehicle-related debt and preferred securities. Budget believes it is unlikely that holders of its convertible subordinated notes, trust preferred securities, and common stock will receive any distribution or recovery. It is expected that the holders of Budget senior notes will receive a distribution at the conclusion of the bankruptcy process.
A committee of Budget Group's unsecured creditors expressed support for the sale to Cendant. The agreement will, however, be subject to a bankruptcy court auction for
higher and better offers.
The sale is subject to certain conditions, including bankruptcy court and regulatory approval outside the United States.
Lazard Freres & Co. is acting as Budget's exclusive advisor with respect to the sale process; Salomon Smith Barney is acting as
Cendant's financial advisor.