Europe Car Rental Market to Consolidate, Says Europcar CEO

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Europe’s fragmented car rental market is ripe for consolidation, according to the chief executive of Europcar Group SA, one of the continent’s largest such groups.

“The top five players now represent 65 percent of the market,” Philippe Germond said in an interview in London. Europcar, which is owned by French investment firm Eurazeo SA, is preparing for an initial public offering in Paris and will look at bolt-on acquisitions after listing, he said.

Europcar competes with rental companies such as Avis Budget Group Inc., Enterprise Rent A Car, Hertz Global Holdings Inc. and Sixt Rent A Car, according to its IPO filing.

The company plans to raise 475 million euros ($536 million) through its IPO, and will use the funds to restructure its balance sheet and reduce debt levels to below 1.5 times estimated corporate earnings before interest, taxes, depreciation and amortization for 2015, Germond said. The shares may be sold before the end of the first half, he said in May, though timing will depend on market conditions.

Europcar could be valued at about 4 billion euros in a sale, people familiar with the matter told Bloomberg in December. That represents about 13 times its 2015 estimated Ebitda, according to a presentation seen by Bloomberg.

Companies in Europe have raised about $30 billion from IPOs this year as investors bet on growth in the region, compared with $17 billion in the U.S., data compiled by Bloomberg show.

Germond said Europcar’s business has not been affected by the growth in recent months of car-sharing and rental companies like Autolib, backed by French billionaire Vincent Bollore, and San Francisco-based Uber Technologies Inc.

“Car sharing companies are not cannibalizing our business, they are complimentary to it,” he said. Customers rent Europcar vehicles for an average of about five days while car-sharing companies can average about 40 minutes per rental, he said.

In January, Europcar announced its first strategic acquisition -- a majority stake, alongside the founders, in Ubeeqo, a French startup specializing in car sharing.

Consolidation in the U.S. car-rental market is more advanced. Hertz’s $2.6 billion acquisition of Dollar Thrifty Automotive Group Inc., agreed in 2012, shrank the number of major rental-car firms in the U.S. to three from four. The European market is worth about 12.4 billion euros, according to 2013 data from Euromonitor.

Europcar operates through 3,650 rental locations in more than 140 countries, according to its website. It has the largest share of Europe’s rental market with about 19 percent, compared to 13 percent for Avis and 12 percent for Hertz, according to figures from 2013 included in the IPO filing.

(An earlier version of this story corrected a debt ratio in the fourth paragraph.)

(Adds IPO volumes in the sixth paragraph.)
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