SAO PAULO Cia de Locação das Américas SA agreed to acquire smaller rival Auto Ricci SA in cash and stock for about 176 million reais ($57 million) on Monday, creating Brazil's largest fleet rental company, according to a securities filing and a person with knowledge of the situation.
Under terms of the transaction, Locamerica (LCAM3.SA) will acquire the equivalent of a 33.7 percent stake in Ricci for about 54 million reais. Shareholders of Ricci will be paid the remaining amount at a ratio of 1.91 Ricci shares, which are not listed, per each of Locamerica, according to a securities filing.
According to the source, Ricci is being valued at 176 million reais, around 9.4 times its net income.
Ricci's controlling shareholder, Dirley Ricci, will hold a 17.7 percent stake in Locamerica and join the company's controlling bloc alongside businessmen Luis Fernando Porto and Sergio Resende. Shareholders in São Paulo-based Locamerica will own 79 percent of the combined entity, the person said.
The transaction is the latest in Brazil's buoyant car rental market, which in the past year has seen a flurry of stake purchases from strategic players and also public offerings.
The bullish outlook for the industry underscores resilient demand for car rentals despite Brazil's longest and harshest recession ever, high unemployment and a slump in discretionary consumer and corporate spending.
Analysts have been raising their rental volume and fleet utilization ratio forecasts for this year, a sign that a gradual recovery in Brazil's economy is expected to gain traction.
After the acquisition, which is still pending regulatory approval, Locamerica will own 43,000 cars and earn 1.1 billion reais in annual revenue - the most among fleet rental players.
"The merger will raise our scale and reduce costs," Locamerica's Chief Executive Officer Luis Fernando Porto told Reuters in an interview. He declined to confirm the value of the deal and terms of the cash-and-stock transaction.
($1 = 3.0759 reais)
(Reporting by Tatiana Bautzer; Editing by Guillermo Parra-Bernal and Lisa Shumaker)