China Auto Rental Leaning Toward Hong Kong IPO, Chairman Says
China Auto Rental Holdings Inc. (CARH), the country’s biggest car-rental provider, is leaning toward an initial public offering of its stock in Hong Kong within the next three years, the company’s chairman said.
“I personally prefer Hong Kong over the U.S. because investors in Asia, especially in Hong Kong, are more familiar with and interested in our business,” Charles Lu, 43, chairman and founder of China Auto Rental, said in an interview yesterday. Still, he hasn’t ruled out a U.S. IPO, he said.
A sale would help the company, which counts Hertz Global Holdings Inc. (HTZ) and Lenovo Group Ltd.’s parent as investors, raise funds to expand its fleet in the world’s largest auto market. Alibaba Group Holding Ltd., China’s biggest e-commerce company, is discussing a Hong Kong listing, a person familiar with the matter said this week.
Beijing-based China Auto Rental withdrew its application for a U.S. IPO last year as accounting scandals and share declines since 2010 caused investor appetite for mainland Chinese companies to dwindle.
Hertz, which in April agreed to buy about 20 percent of China Auto Rental, may increase its holdings in the Chinese company when the IPO occurs, Mark Frissora, chairman and CEO of Hertz, said in a separate interview, though he declined to specify by how much.
Bigger Than France
“This market has grown a lot faster than I ever would have imagined,” Frissora said in reference to China. “It’s already sized as about a $4 billion rental car market. It’s actually a little bigger than France, which is the biggest rental car market in Europe.”
Demand for vehicle leases is projected to rise in China as more cities impose ownership restrictions, taxi fares increase and the government cuts spending on official cars, Lu said. Hertz estimates the car-rental market to expand more than 15 percent annually through 2017.
China Auto Rental, which operates the zuche.com website, had about 700 outlets spread across 66 cities and 52 major airports in the country as of the end of last year, according to Lu. It plans to double the fleet of about 55,000 vehicles to 100,000 units in three years, Lu said.
The Chinese company will turn profitable for the first time this year, with profits of “tens of millions” of yuan while revenue will increase more than 50 percent to about 2.5 billion yuan ($410 million), he said.
Legend Holdings Ltd., parent of Lenovo (992), owns 41 percent of China Auto Rental, according to Brian Zang, vice president of the car-rental provider. The Chinese company also received a $200 million investment from Warburg Pincus LLC in July 2012.
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