Avis Budget Buys Budget Brand's Licensee
It seems that Avis Budget Group, Inc. (CAR), one of the world’s major vehicle rental companies, is seeking to aggressively increase the number of company operated locations in fast growing markets. This is part of the company’s plan to expand its global footprint and enhance customer experience.
Notably, last week, Avis Budget agreed to acquire the existing Budget Car & Truck Rental licensee in Edmonton, Alberta, Canada and decided to directly operate Budget Car Rental brand in Portugal with immediate effect.
The company, which has been operating its Budget Car & Truck Rental brand in Edmonton since 1963, announced on Feb 27 that it has agreed to buy back these licenses for approximately $30 million plus fleet costs. With this, Avis Budget will be acquiring 26 rental locations in seven cities that will enable it to gain a larger market share of Canada’s domestic, international and truck rental spending.
The capital of Alberta, Edmonton is the fifth largest Canadian city and an important world destination for the oil, gas and petrochemical industries for more than half a century. We believe that the importance and growth potential of this location has lured the company to operate directly.
Going ahead with its strategy, on Feb 28, Avis Budget declared that it would operate its Budget Car Rental brand directly in Portugal with immediate effect. Earlier, Avis Budget operated its Budget Car Rental brand under license agreements in the country while the Avis Car Rental brand was operated by the company directly.
Avis Budget has a total of 34 Budget Car Rental locations in the country. The company believes that its latest move will enable it to utilize resources better to gain more market share.
Budget Car Rental is a well-known car rental brand operating in about 3,150 locations in over 120 nations. Under the brand, Avis Budget operates as an industry leading vehicle rental service provider targeting value-conscious travelers. The brand also operates the second-largest truck rental business in the United States, through a network of nearly 1,900 locations.
We believe that the recent strategic move will facilitate Avis Budget to enhance the Budget brand loyalty by better utilizing the licensee’s established presence which will ultimately boost its top line.
Carrying a Zacks Rank #2 (Buy), Avis Budget Group is a leading vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 10,000 rental locations and 350,000 vehicles enables the company to strengthen its well-established position in a highly competitive vehicle rental industry.
Avis Budget follows a core global strategy of collaborating with leading travel brands to expand its customer reach while creating additional demand. In Mar 2013, Avis Budget successfully completed the acquisition of the world’s leading car sharing network company, Zipcar Inc. The move enabled the company to extend its offerings from car rental to car sharing, thereby helping it to compete with peers like United Rentals Inc. (URI), Hertz Global Holdings Inc. (HTZ) and Ryder System Inc. (R).
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