With Interest Aplenty and Options Abounding, Is VW Actually Going to Sell Europcar?
Volkswagen has accumulated six interested buyers since it announced last year that it would be spinning off its rental car business, Europcar. But is the automaker actually going to sell?
Volkswagen has accumulated six interested buyers since it announced last year that it would be spinning off Europcar, its rental car business, as part of a reorganization that has already included the sale of its IT company, Gedas. But with interest aplenty at - according to the Financial Times of London – an estimated $3 billion asking price, should VW hold on to the largest car rental operator in Europe?
A Jan. 8 MSNBC report included five private equity groups and German car rental company Sixt as parties considering the purchase. In New York, Cerberus Capital Management, Blackstone Group, The Carlyle Group and Merrill Lynch, and Global, are bidding, and in Europe, investment firm Cinven has shown interest. And many 2005 reports had the automaker mentioning Europcar, which it has controlled since 1999, in the same breath as its now sold Gedas.
So by the turn of the year, it's no wonder that many thought the sale of the rental car company was inevitable.
But a company that makes money, such as Europcar, is tough to let go. And the restructuring may cost VW more than it’s worth.
Bankhaus Metzler analyst Jürgen Pieper told The Business Online that money from a potential sale would have to fund compensation packages for Europcar employees.
VW could be forced to offer cash to nearly 20,000 workers to either retire early or quit, Pieper predicts. That number is larger than the current forecasts.
The cash offer could also jump to 100,000 euro ($120,860 USD) a person as compensation packages are, as of this year, subject to German income tax. That could propel the cost of restructuring alone to nearly $2.5 billion.
And most recently, Automotive Business Review reported Jan. 9 that Bernd Pischetsrieder, VW’s CEO, might not sell Europcar at all, but try to garner funds by launching an initial public offering for the company instead.
With an IPO of Europcar, the automaker would preserve control over the company, while bringing in enough capital to allow for the sale's original motive: invest in and concentrate on its core manufacturing business.
Yet another alternative could be a cross-sharing with private equity firm Cerberus.
So, what is certain at this point – maybe the only thing – is that VW has a number of options from which to choose. It's now just a matter of what and when.
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