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UPDATE 2-Brazil's Localiza, Unidas in talks for $730 mln asset sale to Brookfield

·1 min read

(Adds details, analyst comment, shares reaction)

SAO PAULO, June 3 (Reuters) - Brazil's Localiza Rent a Car SA said on Friday it was in talks to sell about 3.5 billion reais ($730 million) of assets to an investment fund managed by Brookfield Asset Management Inc.

Asset sales are a requirement of Localiza's tie-up agreement with rival Unidas, formally known as Companhia de Locacao das Americas.

Brazil's antitrust regulator approved the tie-up late in 2021, but demanded the companies divest assets including the Unidas brand to avoid dominating the market.

Canada's Brookfield controls Brazilian rental car company Ouro Verde, which said in a securities filing the talks involved assets in the rent-a-car and used vehicle businesses to be divested from Unidas.

The potential deal was first reported by Bloomberg News late on Thursday.

"As it is a competitive process, the companies are also negotiating with other interested parties. Up to this date, there is no binding document signed with any of the interested parties," Localiza said in a separate filing.

Analysts at Guide Investimentos said the potential deal would be a strong cash-generating move for Localiza and an additional step towards its merger with Unidas, but also reinforce competition as it would strengthen Ouro Verde.

Ouro Verde "might become a threat to Localiza," Guide said, noting the company had plenty of capital after a $60 million investment from Brookfield recently.

Shares in Localiza were down 0.7% at 55.89 reais in early trading in Sao Paulo, in line with the broader Bovespa stock index, while Unidas shares were trading near flat.

($1 = 4.7965 reais)